An Energy Futures, Inc. Study By James S. Cannon

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1 Container Ports and Air Pollution An Energy Futures, Inc. Study By James S. Cannon a

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3 Container Ports and Air Pollution An Energy Futures, Inc. Study By James S. Cannon 2009: Energy Futures, Inc. i

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5 Table of Contents Executive Summary 1 Chapter 1: Introduction 6 Chapter 2: U.S. Container Ports 2008 Update 13 Chapter 3: Container Port 2008 Profiles 22 Profile: Ports of Los Angeles and Long Beach 23 Profile: Port of New York and New Jersey 31 Profile: Port of Savannah 33 Profile: Port of Oakland 35 Profile: Port of Hampton Roads 38 Profile: Port of Seattle 40 Profile: Port of Tacoma 42 Profile: Port of Houston 44 Profile: Port of Charleston 46 Chapter 4: International Container Shipping 48 Acknowledgements 62 About the Author 62 References 64 iii

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7 Executive Summary The 4,600 container ships plying the oceans today are the backbone of globalization, the commercial strategy that has dominated the world s economy for the last 30 years. Twin environmental and energy crises are now challenging globalization. Bunkerfuel, the dregs of oil refining now powering most ships at sea, is subject to new international laws adopted in October 2008 that could greatly restrict its use and raise fuel costs. The second crisis stems from the increasing awareness of the environmental consequences of energy use, both from bunkerfuel emissions from container ships and diesel air pollution from the thousands of land-based vehicles used daily to transport goods to and from ports. Just one step above asphalt, bunkerfuel is a viscous, jet black semi-solid that must be heated to make it liquid enough to be piped from storage tanks and injected into an engine. Due to its poor quality and limited applications, bunkerfuel generally sells for half to two-thirds the price of the crude oil from which it was refined. Current fuel quality standards set by the International Maritime Organization (IMO) allow the use of bunkerfuel that contains 45,000 parts per million (ppm) of sulfur, a key fuel contaminant and air pollutant. This is thousands of times more polluting than diesel allowed in onroad trucks in the United States (U.S.), which can contain no more than 15 ppm of sulfur. An October 2007 study calculated that air pollution emitted by ships burning bunkerfuel takes a horrific health toll on coastal populations, causing about 64,000 annual premature deaths, mostly from cardiopulmonary diseases or lung cancer. Other pollution problems exist as well. For example, if the international shipping industry were a country, it would rank just below Japan as the fifth largest emitter of carbon dioxide, the leading greenhouse gas causing global warming. 1

8 A premise of the work of Energy Futures, Inc. in its studies of air pollution in the container shipping industry is that alternative fuels offer viable options for use in goods movement operations to replace polluting fuels derived from oil. Container Ports and Air Pollution is a new study from Energy Futures that updates an earlier Energy Futures report, U.S. Container Ports and Air Pollution: A Perfect Storm, published in February The new report also includes an analysis of air pollution control efforts underway at ports outside the U.S. and examines international maritime issues, such as emissions from transoceanic ships. U.S. Container Ports: An Emerging Market for Alternative Fuels U.S. container ports completed their 20th consecutive year of growth in The top ten container ports handled 78.9 percent of all containers unloaded in the U.S. from abroad in In total, they handled about 45 million twenty foot equivalent units (TEUs) of containers during the year. A standard container includes two TEUs of storage. During the past ten years, the 10 largest ports grew by 92.6 percent, exceeding the overall growth of 72.0 percent across the entire industry. This growth in business has been accompanied by increasing port pollution. Air pollution at ports has been a major problem that has been largely unrecognized by the U.S. government and by state and local governments outside of California, but this is beginning to change. In July 2008, Congress passed the Maritime Pollution Prevention Act, which officially adopted the provisions of the IMO regulating emissions from ships. In 2008, two bills were introduced in Congress to establish a $25 container fee that would be collected by U.S. port authorities and applied to reduce port air pollution, but neither passed. In California, the first installments from a new $1.0 billion state bond fund dedicated to addressing environmental issues at ports were made in The California legislature passed a state container fee bill to finance more port cleanup by a wide margin, but it was vetoed by the governor. Meanwhile, many ports themselves are taking action to reduce the pollution they generate through innovative alternative fuel and technology programs. The table on the next page lists the alternative fuel projects currently underway at U.S. container ports. Natural gas is currently the leading alternative fuel used at U.S. container ports. In 2008, regional truck programs were launched at the three California ports that are likely to deploy thousands of natural gas powered onroad trucks during the next few years. They represent a major expansion of early natural gas programs, which, prior to 2008, included less than 30 prototype vehicles. 2

9 major active alternative fuel projects at u.s. container ports Port Year Project Description Natural Gas Los Angeles (LA) LNG Yard Tractors at YTI Terminal Long Beach (LB) LNG Yard Tractors at ITS Container Terminal LA and LB LNG Yard Tractors at Commerce Rail Yard Oakland LNG Drayage Trucks Oakland 2007 Mobile LNG Cold Ironing Power Generator LA and LB 2008 Clean Truck Program to Upgrade 16,000 Drayage Trucks Oakland 2008 Clean Truck Program to Upgrade 3,000 Drayage Trucks LA 2008 Mobile LNG Cold Ironing Power Generator Grid or Hybrid Electric Los Angeles 2006 Grid Alternative Marine Power at 1 Terminal Long Beach Hybrid Yard Tractor at Long Beach Container Terminal Los Angeles 2007 Foss Maritime Hybrid Tugboat New York/New Yersey Hydraulic Hybrid Yard Tractor at Terminal in Elizabeth New York/New Jersey Hybrid Electric Yard Tractors at Terminal in Staten Island Hampton Roads Green Goat Hybrid Electric Locomotive Los Angeles Battery Electric Drayage Truck Long Beach 2006 Grid Cold Ironing at 1 Terminal Biodiesel Tacoma % Biodiesel Blend at Husky Container Terminal Seattle % Biodiesel in Port of Seattle Vehicles Electric vehicle use is rapidly growing at U.S. container ports, representing an important new alternative fuel option. In 2008, hybrid electric yard tractor and rubber tire gantry projects were launched at the Port Authority of New York and New Jersey and the Port of Long Beach in California, and a hybrid electric locomotive was purchased by the Port of Hampton Roads in Virginia. Development of a hybrid electric tugboat continued to make progress in The first pure electric vehicle made its debut in 2008 at the Port of Los Angeles. Major shore power programs to replace electricity generated from fuel burning ships with grid power delivered by wire to container ship berths are underway at the ports of Los Angeles and Long Beach. In October 2008, a dockside power unit fueled by natural gas was demonstrated at the Port of Los Angeles, duplicating an earlier demonstration at the Port of Oakland. Interest in biodiesel remains strong at northwestern container ports. The ports of Seattle and Tacoma on Puget Sound in the state of Washington continue to spearhead the use of biodiesel blends in their vehicle fleets, although no new biodiesel programs were launched in

10 International Container Shipping The U.S. is the largest importer of containerized goods, yet the millions of containers handled at U.S. container ports annually comprise only about 10 percent of the global container trade. In 2008, environmental programs affecting the international goods movement made significant progress. Most importantly, the IMO adopted amendments to regulations governing air pollution from ships in October. The revisions will require a progressive reduction in the global sulfur cap on bunkerfuel from the current limit of 45,000 ppm to 5,000 ppm. There are no simple ways for the shipping industry to comply with the new IMO cleaner fuels provisions. To switch to a cleaner grade of petroleum fuel means switching from bunkerfuel to higher grade middle distillate fuels. These fuels historically have cost between twice and three times as much as bunkerfuel. Moreover, the distillate fuel market is already the most competitive market for oil derived fuels, including diesel truck fuel and aviation jet fuel. The entry of marine diesel fuel purchasers would further strain supplies and could cause prices to escalate. Switching to alternative fuels is another option. Natural gas is the alternative fuel most widely used in ships. There are currently 52 oceangoing ships operating or on order worldwide powered by natural gas with a total power capacity of 2,000 MW. Emissions of particulate matter decline 70 percent, nitrogen oxides fall 72 percent and sulfur dioxide emissions are virtually eliminated when bunkerfuel is replaced by natural gas. Renewable fuels, particularly wind power, could replace at least a portion of bunkerfuel burned in ships. SkySails GmbH & Co. is currently marketing a large towing kite that can reduce ship fuel consumption by 50 percent under favorable conditions. A second international effort is sponsored by the C40 Climate Leadership Group, an alliance of cities committed to tackling climate change. In July 2008, the city of Rotterdam in The Netherlands, home to Europe s largest container port, hosted a conference addressing world ports and climate change. Fifty-five ports endorsed the World Ports Climate Declaration at the conference, committing to reduce emissions of carbon dioxide and to improve air quality. Europe: Unlike container port cleanup programs in the U.S., which have been created mostly by individual port authorities, progress in Europe has been directed by the European Commission. Its Energy and Transport Directorate and Environment Directorate have studied European port issues, funded a number of port cleanup projects and produced a series of marine policy reports. In June 2006, the commission released its Maritime Policy Green Paper, followed in October 2007 by an official action plan, called the Integrated Maritime Policy for the European Union. The policy creates a roadmap to facilitate continued growth in maritime activities while reducing the environmental footprint of these activities throughout Europe. The Port of Rotterdam manages an extensive array of programs designed to reduce air pollution from container handling, guided by its Port Vision 2020 plan adopted in The plan endorses a number of strategies to reduce air pollution from port operations, despite a projected 250 percent growth in container traffic. The port is studying the use of natural gas as a fuel for hundreds of barges carrying containers from the port to inland destinations. It is also developing a sustainability shipping index to create financial incentives, such as lower fees for clean ships and access to preferred green lanes for ship operators that comply with the index. Pollution control efforts are being applied in the development of the massive new Maasvlakte 2 port complex through the application of sustainability components among four evaluation criteria in applications for terminal operators. Asia: In Asia, it is the container terminal operators that have taken the lead in port cleanup efforts. A review of port cleanup efforts in Asia by Energy Futures including field research in Singapore, Hong Kong and Shanghai found a number of container port programs involving the use of alternative fuels 4

11 and advanced propulsion technologies. Unlike the U.S., where natural gas is currently leading other alternatives to diesel, in Asia, various uses of electrical energy are the alternative of choice. Energy Futures identified only one natural gas vehicle project at Asian container ports, two yard tractors at the port of Bangkok, but it found hybrid electric rubber tire gantry projects underway at a number of ports, including Hong Kong and Shenzhen in China. Moreover, the Shanghai East Container Terminal Co., Ltd. has converted 48 diesel gantries to electricity delivered from the grid. The electricity is provided from fixed overhead power lines though flexible cables. Recommendations The current global economic crisis is hitting the international container industry particularly hard. The final count is likely to indicate a small drop in container shipments in 2008, and 2009 could see the first substantial decline in container trade in more than two decades. Global ship orders, a key indicator of longer term trends in shipping, dropped 90 percent in October 2008 compared to orders placed a year earlier. Hard economic times create an added burden on the shipping industry as it addresses its environmental challenges, but it also creates an opportunity to implement more fundamental changes to the industry than are possible during periods of rampant growth. Container Ports and Air Pollution identifies a growing array of advanced projects to deploy vehicles powered by alternative fuels, especially natural gas and electricity, in container port operations. These fuels work well in port applications and there is great promise that they can be more widely used in the container shipping supply chain. More funds are needed to optimize alternative fuel use in many specialty vehicles used in the goods movement industry. Direct government funding of research and development programs and indirect funding through tax credits and other incentives for alternative fuel vehicle deployment are needed. In the U.S., one critical air pollution control element that is currently lacking is a coordinated national port cleanup strategy. Several ports are already acting individually and cooperatively to reduce air pollution. The next logical step is to broaden these efforts through federal government leadership. A national strategy should establish minimum cleanup targets for all ports and include a national funding mechanism to finance uniform and comprehensive port cleanup. To help achieve this goal, the U.S. government should look to the model created by the ambitious port programs being implemented by the European Commission. Asia, with its reliance on private sector leadership, also provides a good model for new port cleanup strategies. One of the first steps international shipping companies and their global terminal operators should take in response to the new IMO rules is to participate in expanded port pollution control programs to gain vital experience in the use of alternative fuels. This would leave them better informed several years from now when tough choices will have to be made about how to power transoceanic ships. In the meantime, port communities will benefit from improved air quality. In recent years, most international shipping lines have established green programs to improve the environmental performance of their ships and container terminals. The economic downturn gives these companies the chance to proceed carefully to incorporate changes in their operating procedures that both reduce pollution and save money. Natural gas and electricity are both cheaper fuels than many of the grades of diesel and bunkerfuel now used for goods movement. A particularly innovative addition to these green programs would be partnerships between alternative fuel providers and shipping companies to deploy cleaner cargo handling vehicles at port terminals around the world. The partnerships could take advantage of local government incentives to help finance use of alternative fuels, but leadership of these green programs would remain in the private sector. This leadership is overdue. 5

12 Chapter 1: Introduction More than 90 percent of the consumer goods sold in the United States (U.S.) arrive aboard transoceanic container ships. The 4,600 container ships plying international waters today are the backbone of globalization, the commercial strategy that has dominated the world s economy for the last 30 years. 1 Globalization connects regions where labor is cheap and willing to work to regions where consumers are richer and willing to buy. Transporting goods thousands of miles across oceans has been cheap and easy because inexpensive, though very polluting, bunkerfuel has been widely available for a flotilla of specially designed ships capable of carrying goods efficiently over the seas. With cheap labor and transportation, it is now less expensive to bring a pair of shoes manufactured in Asia thousands of miles across several oceans to a customer in the U.S. than it is to manufacture the same shoes 10 miles from the consumer s home. Surprisingly, it is also more energy efficient, resulting in lower emissions of the greenhouse gas carbon dioxide. In fact, transporting one pair of tennis shoes from a factory in Asia to western markets emits only one-tenth the carbon dioxide released by a car driven 10 miles from home to the shoe store to buy it. 2 However, lots of tennis shoes and millions of tons of other goods make the journey across the seas. Thus, the shipping industry is still a huge emitter of carbon dioxide and an assortment of other noxious pollutants that are harmful to the planet and human health. To date, few people have addressed the environmental consequences of moving goods across the oceans. Concerns historically have evaporated as the ships have disappeared over the horizon on the open seas. Twin environmental and energy crises are now challenging globalization. Bunkerfuel, the dregs of oil refining, is subject to new international laws adopted in October 2008 that could greatly restrict its use. The second crisis involves the increasing awareness of the environmental consequences of energy use, not only from bunkerfuel emissions from container ships, but also from diesel air pollution emissions from the tens of thousands of land-based vehicles used daily to transport goods to and from ports. These crises will remold the rules of globalization in the years ahead. The fact that they emerge at a time of international financial crisis heightens the challenge, but it also creates an opportunity to invest newly freed resources into more fundamental changes in goods movement needed to move into the era of sustainable and clean energy. 6

13 The Emergence of Container Shipping The first container ship, the Ideal X, cast off from Port Newark, New Jersey, on April 26, 1956, setting a course for Houston, Texas. It carried 58 filled containers, which were transferred, still fully loaded, to trucks in Houston and driven to their destinations.3 The goal was not to create a global economy, but simply to avoid the notorious delays, damage and theft common when goods were loaded and unloaded at the piers. Figure 1 Typical container ship at berth The success of the Ideal X triggered a revolution in transoceanic goods movement. A period of intense debate at the International Standards Organization in Geneva, Switzerland, led to the selection of a 40-foot long and 8.5-foot high and wide container as the industry standard. Each container holds 2,390 cubic feet of storage space and is measured in industry parlance as two 20-foot equivalent units (TEUs).4 A typical 40-foot container can store over 31,000 bottles of wine, 17,500 frozen chickens or 1,200 Christmas trees.5 In 2006, container ports around the world handled million TEUs of containers.6 Figure 2 Container size has been standardized internationally to fit on trucks The shipping industry rapidly responded to the demand for container delivery by building specially designed ships that have grown dramatically in size. While the Ideal X carried just 58 containers, several transoceanic giants now under construction will be able to carry 12,000 TEUs of containers. For most of the last 30 years, the Panamax vessel, sized for transit through the Panama Canal, dominated the global container shipping fleet. Each Panamax ship carries 4,500 TEUs of containers. The current fleet also includes a number of larger ships carrying between 5,000 and 8,000 TEUs of containers on routes that do not include the Panama Canal.7 These and the larger ships now under construction up to 12,000 TEUs will be able to traverse the Panama Canal beginning in 2014, when the canal widening project now underway is completed. Very cheap transportation fuel for these ships has been provided for decades by the oil industry in the form of bunkerfuel. Just one step above asphalt, bunkerfuel is a viscous, jet black semi-solid that 7

14 must be heated to 240 F before it is liquid enough to be piped from storage tanks and injected into an engine. Less than 30 percent of crude oil emerges near the bottom of the refining process as bunkerfuel. Bunkerfuel generally sells for half to two-thirds the price of the crude oil from which it was refined. 8 Therefore, bunkerfuel sales alone are a losing economic proposition for the oil industry, but its use as ship fuel generates revenue for the refining industry and it avoids a costly disposal problem for the industry if it were forced to dump it as waste material. Following the hog industry s pledge to sell everything but the oink, the sale of bunkerfuel to the shipping industry has been a critical part of the economics of oil refining for decades. Bunkerfuel is the dirtiest fuel refined from oil on the fuel market. It is a sulfur sink where sulfur contamination originally in crude oil ends up, says Rudy Kassinger, a fuels expert with DNV Petroleum Services. 9 The current international fuel quality standards allow the use of bunkerfuel in transoceanic ships that contains 45,000 parts per million (ppm) of sulfur, although bunkerfuel on the global market averages a somewhat cleaner 27,000 ppm of sulfur. Either grade is thousands of times more polluting than diesel fuel allowed in onroad trucks. In the U.S., for example, onroad diesel fuel can contain no more than 15 ppm of sulfur. In Germany, the sulfur limit for onroad diesel is 10 ppm of sulfur. Once on land, use of cleaner diesel is required, but the vast numbers of trucks coursing U.S. highways between ports and markets still create one of the largest sources of air pollution in the U.S. Part of the problem is the heavy reliance, especially in the U.S., on trucks to deliver goods. The container industry received a boost by completion of the Interstate Highway System in the U.S., coincidently in 1956, the year of the maiden voyage of the Ideal X. First envisioned as part of a national defense strategy, the highway system also provided access by trucks carrying containers to virtually every city in the country. Although some containers are carried on rail cars, barges and small short sea ships to markets, tens of thousands of trucks carry roughly 80 percent of all containers to markets in the U.S. Since the deregulation of the trucking industry more than a decade ago, the U.S. truck fleet has aged as many cash-poor independent trucker drivers often drive their rigs well past retirement age. The oldest sector of the fleet is the 50,000 drayage truck fleet directly servicing U.S. container ports, carrying containers short distances between the port and nearby distribution centers, where they are transferred for long distance transport. The model of moving containers in aging trucks on antiquated roads by poorly paid drivers is a critical problem facing goods movement in the U.S. Other modes are cleaner, cheaper and more efficient, but there is little infrastructure, especially in the U.S., to capitalize on the barge, short sea and rail options. Environmental Challenge A U.S. National Oceanic and Atmospheric Administration report in July 2008 concluded that commercial shipping emissions are one of the least studied areas of all combustion emissions. 10 That said, evidence is accumulating that identifies transoceanic goods movement as one of the leading sources of uncontrolled air pollution in the world today. The International Maritime Organization (IMO), a division of the United Nations that sets standards for the global marine industry, estimated in January 2008 that sulfur dioxide emissions from shipping total 16.2 million metric tons per year. 11 This is far more than the 9.5 million tons of sulfur dioxide emitted from coal burning by all the electric generating power plants in the U.S. 12 According to a March 2007 report by the International Council on Clean Transportation (ICCT), a U.S. based environmental policy group, ships emit more sulfur dioxide than the entirety of the world s cars, trucks and buses combined. 13 The Environmental Defense Fund (EDF), a national nongovernment organization based in New York City, released a report in October 2008, Floating Smokestacks: A Call for Action to Clean Up Marine Shipping Pollution, concluded that, as onroad vehicles become cleaner, large oceangoing ships will become 8

15 an increasingly significant portion of the total emissions from the mobile source sector. 14 Nitrogen oxide pollution from oceangoing ships will grow from 6 percent of global transportation emissions in 2001 to 34 percent in 20 years, according to U.S. Environmental Protection Agency (EPA) estimates, unless checked by new standards. By 2030, oceangoing ships will be responsible for about 16 percent of nitrogen oxides from all sources. Fine particulate matter will increase from 11 percent of total transportation emissions in 2001 to 46 percent in The adverse health effects of international shipping, especially on residents of coastal port communities, is becoming clearer. An October 2007 study led by James Corbett from the University of Delaware College of Marine and Earth Studies calculated that particulate matter emitted by ships takes a horrific health toll on coastal populations, causing about 64,000 annual premature deaths, mostly from cardiopulmonary diseases or lung cancer. This is between 3 and 8 percent of all global premature deaths from exposure to particulate matter. The entire impact is felt in coastal communities, which comprise only a small portion of the populated regions of the globe. 15 In a January 2008 case study of one coastal port region, the third Multiple Air Toxics Exposure Study (MATES III) by California s South Coast Air Quality Management District found high cancer risks among residents in the Los Angeles Basin from exposure to toxic and carcinogenic air pollution. The report found that residents are exposed to a lifetime cancer risk from toxic air pollution of 1,200 in one million, one of the highest risks in the country. The highest risk level within the basin was found to be in the port areas of Los Angeles and Long Beach, where the lifetime cancer risk more than doubled to 2,900 in 1 million. MATES III found that diesel exhaust emissions, 94 percent of which come from mobile sources including port operations, account for approximately 84 percent of regionwide cancer risk. 16 Marine shipping is also the source of substantial greenhouse gas emissions in the form of carbon dioxide from fuel burning. According to the IMO, oceangoing ships emit 1.1 billion metric tons of carbon dioxide each year. The IMO predicts emissions will rise to 1.5 billion metric tons by If the international shipping industry were a country, it would rank just below Japan as the fifth largest emitter of carbon dioxide. 18 Marine emissions are now about 4.4 percent of total global carbon dioxide emissions of 25 billion metric tons annually and about 12 percent of carbon dioxide emissions from all transportation sources. Added to ship emissions are the emissions from the tens of thousands of trucks carrying container goods to markets and the emissions from other land vehicles that are part of the goods supply chain. Energy Challenge A July 2008 study commissioned by the IMO concluded that the slightly more than 100,000 ships in the global marine fleet consume a total of 339 million metric tons of marine fuel annually, about 80 percent of it in the form of bunkerfuel and the rest as somewhat cleaner marine distillate fuel. 19 The annual use of 339 million tons translates to roughly 2.3 million barrels per day (MMbpd), which is significantly more than global jet fuel demand of about 1.8 MMbpd for the aviation industry. If bunkerfuel becomes off limits to the shipping industry for environmental reasons, the industry s first choice as a replacement would probably be distillate fuels similar to diesel truck or jet fuel. This would increase the demand for distillate fuels, the supplies of which are already strained. Additional oil production and refining capacity would be needed to generate these supplies. A switch of 300 million tons of bunkerfuel per year to cleaner grades of distillate fuel would require an increase in global oil production of 900 million tons per year, which translates to about 6.6 MMbpd. This is greater than the entire oil production today from any country other than Saudi Arabia or Russia. 20 It is highly questionable whether the oil exploration business, already strained to meet the new demand for motor fuels from the developing world, can also supply a new market sector as big as international shipping. 9

16 Some new supplies of distillates can be created by extra refining of bunkerfuel to upgrade its fuel quality, thereby reducing the need for new crude oil. The new distillate fuels created this way would be less efficient and more costly to produce than conventional refining of crude oil. It would take more than a decade to expand the global oil refining capacity to provide distillate fuel by either path to the shipping industry. The cost would be enormous, about $125 billion, according to Rudy Kassinger of DNV Petroleum Services, Inc. 21 Energy Futures Port Research There are other options. A premise of the work of Energy Futures, Inc. since it began studying container port air pollution issues has been that the industry, including shippers and container ports, can address its environmental and energy crises best by introducing alternative fuels and advanced propulsion technologies into its goods movement operations. Such a move would have immediate benefits in reducing air pollution and improving energy security by diversifying fuel sources. In February 2008, Energy Futures, Inc. completed a study, U.S. Container Ports and Air Pollution: A Perfect Storm. The report concluded that air pollution from container ports is bad and getting worse. Impressive cleanup efforts were being implemented in some ports, however, most notably at the ports of Los Angeles and Long Beach in California. Unfortunately, the report found that cleanup was being pursued only inconsistently elsewhere. Moreover, most air pollution control programs focused on reducing emissions from diesel trucks through the use of engine retrofits and cleaner grades of diesel fuel, both of which are commercially available options that will soon be required by federal or state air pollution regulations. These relatively small air pollution reductions will be overtaken by projected growth in container traffic at most ports. Energy Futures concluded that more ambitious pollution control strategies relying on alternative fuels and advanced propulsion technologies will be needed to prevent a worsening of the environmental and energy crises facing ports. The study highlighted several innovative programs underway at the 10 largest U.S. container ports involving the use of natural gas, biodiesel or hybrid electric vehicles. The report identified four demonstration natural gas vehicle projects underway at three ports in California, biodiesel programs at two ports in the Pacific Northwest, and two prototype hybrid electric vehicle projects in early stages at ports in southern California and New Jersey. Based on its analysis, U.S. Container Ports and Air Pollution: A Perfect Storm included five recommendations for public and private sector decisionmakers. The hope was that these recommendations would be considered as the national debate about how to combat the growing air pollution at U.S. container ports moves forward. 1. Promote Use of Alternative Fuels and Advanced Technologies for Port Cleanups. The ability of diesel to meet the energy and environmental demands posed by container ports is already strained. Fuel supplies are insecure, costs are gyrating and pollution control strategies are not likely to achieve emission controls needed to protect public health as port business in constrained urban areas grows, especially if container traffic doubles by 2020 as predicted. Alternatives to conventional use of diesel receive favorable financial incentives in the form of tax credits and fuel tax relief in the Energy Policy Act of Additional policy initiatives in support of their more rapid deployment are being debated by the federal government and by the governments of many states where ports are located. They should be adopted. 2. Develop and Implement a National Port Cleanup Strategy. Every port has a unique competitive position, but all ports are major sources of air pollution that share the same portfolio of pollution control options. When operating alone to address environmental problems, each port must face the possibility that 10

17 changes in its operating procedures could increase costs and place it at a competitive disadvantage to other ports. Several ports recognize this dilemma and are acting cooperatively to prevent adverse competitive repercussions from cleanup efforts. The next logical step is to develop a national port strategy at the federal government level. This strategy should establish minimum cleanup targets for all ports and set long term environmental protection goals. 3. Create a National Funding Mechanism to Finance Uniform and Comprehensive Port Cleanup. A new national initiative to reduce air pollution at ports will require significant funding to be effective. A national debate needs to be initiated that will develop a politically viable strategy to finance uniform and comprehensive port cleanup programs. A national container fee is a potentially attractive option for the federal government. A $30 per TEU fee would raise $1.3 billion, if implemented nationally. This is roughly equal to the annual cleanup costs estimated by Energy Futures to be required between now and A national container fee could collect money from all ports, but return it to them for use in funding pollution control programs. This would ensure a measure of equity and accountability. 4. Advocate Global Environmental Standards in the International Arena. The container ship is part of a global supply chain that includes ports of shipment and receipt. Ultimately, pollution control efforts will not succeed without international cooperation and stronger global performance standards. National leadership in port cleanup efforts would boost the credibility of the U.S. in international arenas, especially at the IMO. The long term goal of IMO negotiations should be to replace bunkerfuel entirely with an alternative fuel. 5. Create a Clearinghouse of Information about Port Cleanup Efforts. There is a lot of information in the public domain about efforts to reduce air pollution at container ports. Nonetheless, there remains an urgent need for a national clearinghouse of information about environmental issues at ports. A central clearinghouse would provide information about environmental problems at ports and onboard ships and about viable pollution control strategies. It could publish progress reports on the implementation of pollution control programs at individual ports. Container Ports and Air Pollution is a new study from Energy Futures that provides a first step toward implementation of the fifth recommendation. It tracks new air pollution control efforts at U.S. container ports during 2008, clearly their busiest year yet for new cleanup initiatives. The report also monitors recent federal and state government regulations aimed at reducing port air pollution, and the ratification of the international marine pollution protocol by the U.S. Congress. The results of this analysis are reported in Chapters 2 and 3. Moreover, Container Ports and Air Pollution includes a new analysis, initiated in April 2008, of air pollution control efforts underway outside the U.S. This investigation examined international maritime issues, such as emissions from transoceanic shipping, and the status of air pollution control programs to reduce this pollution. Like the earlier Energy Futures container port study, the new international study also examined air pollution control programs underway at specific container ports in Europe and Asia. It focused on the ports of Rotterdam in Europe and Hong Kong in Asia, although specific innovative programs at other ports are discussed as well. Information was collected at several conferences in Europe and Asia and in separate fact-finding field trips to each continent. The results of this research are reported in Chapter 4. The current global economic crisis is threatening to hit the international container industry particularly hard. Container volumes dropped at five of the 10 largest ports in 2007, although the industry registered a gain overall. Volumes probably declined slightly in 2008, and 2009 is likely to see the first major decline in container trade to the U.S. in several decades. Ports elsewhere are equally pressed. 11

18 12 The port of Shanghai, for example, on a trajectory to bypass Singapore in 2008 to become the world s largest container port, now seems several years away from a major surge in new container trade needed to assume the top spot. 22 The economic downturn appears to be affecting the entire shipping industry. Global ship orders, a key indicator of longer term trends in shipping, dropped 90 percent in October 2008 compared to orders placed a year earlier, according to Lloyd s Register Group in London. Only 37 ships, including container ships, were ordered in October 2008, compared to 378 in the previous October. 23 The biggest challenge now facing international good movements, coping with hard economic times, barely existed a year ago. This added burden, however, also creates an opportunity to implement more fundamental changes to the industry than are possible during periods of rampant growth, where all the industry s resources are needed to handle burgeoning demand for services. Already there are signs that shipping interests are taking advantage of this opportunity. For example, Maersk, the world s largest container shipping company, implemented a new slow shipping policy in 2008 that is reducing the demand for bunkerfuel and reducing carbon dioxide emissions simply by reducing ship cruising speeds. With ships idle due to the economic downturn, slow shipping is saving money, while reducing energy use and greenhouse gas emissions. The company issued a press release in November 2008 pledging to continue its green policies in spite of the global financial chaos. To cite another example, the IMO is working to develop climate change policies to incorporate into its regulatory framework. In 2008, the IMO opted to approve changes in bunkerfuel quality standards for sulfur and other pollutants without addressing climate change issues also raised by bunkerfuel use. The economic downturn could help minimize environmental harm as the IMO develops a strategy to reduce greenhouse gas emissions from shipping. There are other positive signs discussed in the next three chapters.

19 Chapter 2: U.S. Container Ports 2008 Update In February 2008, Energy Futures, Inc. published a report that examined the air pollution control efforts underway at the 10 largest container ports in the United States (U.S.) to reduce environmental damage from air pollution. The report, U.S. Container Ports and Air Pollution: A Perfect Storm, identified environmental protection programs underway at each port, including several innovative pollution control programs involving the use of natural gas, biodiesel or hybrid electric vehicles. This chapter is a progress report of new developments in 2008 affecting U.S. container ports. The research clearly shows that 2008 was the busiest year yet for new efforts at the ports and at the government agencies that regulate them. The chapter starts with an update of container port operations in 2007, the most recent year for which data are available. It then summarizes the new air pollution programs launched at ports in 2008, followed by a review of actions at government agencies affecting ports. It concludes with profiles of each port s activities in

20 U.S. Container Ports: Big, Diverse and Growing In 2007, U.S. container ports completed their 20 th consecutive year of growth. As shown in Figure 3, container shipments more than quintupled in the U.S. from 1980 to The growth in shipments to and from U.S. ports grew from 8.4 million twenty-foot equivalent units (TEUs) to 45.0 million TEUs during this period. Figure 3 U.S. CONTAINER SHIPMENTS: (million TEUs per year) The top ten container ports handled 78.9 percent of all containers unloaded in the U.S. from abroad in Table 1 shows recent trends in container handling at the top ten ports. During the past ten years, the 10 largest ports grew by 92.6 percent, exceeding the overall growth of 72.0 percent across the entire industry. 14

21 Table 1 TOP TEN CONTAINER HANDLING PORTS: 2006 (million TEUs per year) Annual Growth Port 2007 TEUs 2006 TEUs Los Angeles 8,355,039 8,469, % 147.3% Long Beach 7,316,465 7,289, % 78.6% New York/New Jersey 5,299,105 5,092, % 114.9% Savannah 2,604,312 2,160, % 256.5% Oakland 2,388,182 2,390, % 51.6% Hampton Roads 2,128,366 2,029, % 70.0% Seattle 1,973,504 1,987, % 27.8% Tacoma 1,924,934 2,067, % 66.4% Houston 1,768,627 1,606, % 84.4% Charleston 1,754,376 1,968, % 37.3% Total Top 10 Ports 35,512,910 35,061, % 92.6% Total U.S. Ports 44,993,487 44,413, % 72.0% More than one-third of all containers delivered to the U.S. are unloaded at the adjacent ports of Los Angeles and Long Beach, California. Combined, these two ports are the fifth largest container port in the world behind Singapore, Hong Kong, Shanghai and Shenzhen. 25 In 2007, Oakland dropped from the 4 th largest container port in terms of total TEU shipments to the 5 th position. Tacoma dropped from 6 th to 8 th and Charleston dropped from 9 th to 10 th. On the other hand, Savannah registered the largest growth, with TEU shipments rising 20.6 percent in 2007, and its ranking jumped from 5 th to 4 th. Hampton Roads moved up a slot from 7 th to 6 th, Seattle moved from 8 th to 7 th and Houston moved up from 10 th to 9 th. There were clear signs even in 2007 that the container industry, like the rest of the U.S. economy, was beginning to experience an economic slowdown. Table 1 shows that only five of the ten largest ports showed a growth in TEU deliveries, with only Savannah and Houston showing double digit growth. Five ports experienced declines in TEU deliveries, with Charleston recording the largest drop, 10.9 percent. All ten top container ports are owned by public agencies. Several port authorities manage only seaports. Others also manage airports. All ports receive their revenue from fees collected from the operation of the facilities they manage. The annual total operating revenues of the managing agencies for the top 10 ports covers a wide range. Hampton Roads collected $72.3 million in 2007, for example, while total revenues collected by the Port Authority of New York and New Jersey (PANYNJ) exceeded $3.2 billion. 15

22 Overview of Environmental Protection Programs All 10 top U.S. container ports now have environmental departments within their management structures. In October 2008, the Port of Charleston became the final port among the top 10 to hire an environmental affairs director. The most basic role of environment departments at ports is to assess compliance with government regulations. A first step in creating an environmental protection strategy is usually through an Environmental Management System (EMS), which is now in place at all U.S. container ports. The PANYNJ was one of the first U.S. ports to adopt an EMS. Its program earned the American Association of Port Authorities (AAPA) Environmental Improvement Award in Between 2005 and 2007, the AAPA and the Global Environment & Technology Foundation selected 15 U.S. ports to participate in their EMS Assistance Project. The project provided training on management procedures to analyze, control and enhance the environmental consequences of their activities. The program was divided into four phases, completed over an 18 month span. Each phase began with an intensive workshop that prepares participants to train and lead their port-based EMS implementation teams. In August 2008, the two associations selected Charleston and Savannah among the ten largest container ports to participate in a third round of the training program, which will be completed in The environmental departments at the ports of Los Angeles and Long Beach worked for years to develop a joint strategy to reduce pollution. In November 2006, they adopted the San Pedro Bay Clean Air Action Plan to guide cleanup efforts in the decades ahead. The ports of Seattle and Tacoma created a joint cleanup strategy in May 2007 when they endorsed a draft report titled Northwest Ports Clean Air Strategy. The final version of the strategy was approved by the ports of Seattle and Tacoma early in 2008, but is still awaiting approval by Vancouver. During the past year, the port of Oakland developed a Master Plan, which it expects to adopt soon. The Move to Alternative Fuels The backbones of most air pollution control efforts at U.S. container ports today are efforts to reduce emissions from diesel powered port equipment through the use of newer and cleaner diesel engines, the installation of diesel emission pollution control equipment, and switching to cleaner grades of diesel fuel containing lower sulfur contents. All 10 ports have diesel emission reduction programs in place, collectively spending millions of dollars in public and private funds. Government regulation of diesel equipment will require cleaner engines for onroad trucks beginning in 2010 and requirements for cleaner diesel fuel and engines for use in offroad vehicles will be phased in gradually a few years later. New federal regulations were finalized for some smaller marine engines and for locomotives in March 2008 by the EPA. 27 The California Air Resources Board (CARB) adopted cleaner diesel standards for marine vessels operating in California coastal waters in July Figure 3 Diesel trucks carry most containers from ports to markets around the world 16

23 The long term answer to environmental problems at container ports is to switch to alternative fuels and advanced propulsion technologies that lower emissions, improve efficiency and diversify fuel supplies. Fortunately, important steps are being taken at U.S. container ports that are leading global efforts to replace diesel fuel refined from oil. The earlier Energy Futures study identified four liquefied natural gas (LNG) demonstration projects, two ports where biodiesel blends were being implemented in port vehicles and two hybrid electric vehicle prototype development projects. Several programs to reduce emissions from ships while in U.S. ports, including substituting clean electricity generated on shore for power generated onboard ships while at berth, were also underway. In 2008, regional truck programs were launched at the three California ports that are likely to deploy thousands of LNG powered onroad trucks during the next few years. They represent a major expansion compared to the early LNG cargo handling truck demonstration programs, which included a total of less than 30 prototype offroad vehicles and only one small regional LNG truck demonstration. Also new in 2008 were several hybrid electric vehicle projects, including yard tractors and rubber tire gantries at the PANYNJ and the Port of Long Beach, and a hybrid electric locomotive at the Port of Hampton Roads. Meanwhile, several other projects identified in the earlier report including use of biodiesel in the ports of Seattle and Tacoma, development of a hybrid electric tugboat and demonstration of a natural gas power generator to supply electricity to ships at berth continued to make progress in Alternative fuel projects now underway at the 10 largest U.S. container ports are listed in Table 2. Table 2 major active alternative fuel projects at u.s. container ports Port Year Project Description Natural Gas Los Angeles (LA) LNG Yard Tractors at YTI Terminal Long Beach (LB) LNG Yard Tractors at ITS Container Terminal LA and LB LNG Yard Tractors at Commerce Rail Yard Oakland LNG Drayage Trucks Oakland 2007 Mobile LNG Cold Ironing Power Generator LA and LB 2008 Clean Truck Program to Upgrade 16,000 Drayage Trucks Oakland 2008 Clean Truck Program to Upgrade 3,000 Drayage Trucks LA 2008 Mobile LNG Cold Ironing Power Generator Grid or Hybrid Electric Los Angeles 2006 Grid Alternative Marine Power at 1 Terminal Long Beach Hybrid Yard Tractor at Long Beach Container Terminal Los Angeles 2007 Foss Maritime Hybrid Tugboat New York/New Yersey Hydraulic Hybrid Yard Tractor at Terminal in Elizabeth New York/New Jersey Hybrid Electric Yard Tractors at Terminal in Staten Island Hampton Roads Green Goat Hybrid Electric Locomotive Los Angeles Battery Electric Drayage Truck Long Beach 2006 Grid Cold Ironing at 1 Terminal Biodiesel Tacoma % Biodiesel Blend at Husky Container Terminal Seattle % Biodiesel in Port of Seattle Vehicles 17

24 Natural Gas Vehicles: The Leading Alternative Eight programs to replace diesel fuel with natural gas are now underway at the three largest container ports in California Los Angeles, Long Beach and Oakland. Most of these programs switch yard tractors and regional or drayage trucks from diesel to natural gas. Four demonstration projects have been launched to test the use of LNG in yard tractors. Three are still in operation. The first of these projects was launched in September 2005 at YTI Terminals in Los Angeles. Other projects were launched at the Long Beach Container Terminal, the Commerce Rail Yard and the ITS terminal. Fewer than 20 prototype LNG yard tractors serving the ports of Los Angeles and Long Beach have been deployed to date. The Long Beach Container Terminal demonstration has been completed. In 2007, Pacific Gas and Electric Company (PG&E) teamed with Burlington Northern Santa Fe Railroad to convert 10 drayage trucks at the port of Oakland to LNG. The trucks were put into service by a local green trucking company, CleanAir Transport. Figure 4 Natural gas powered yard tractors are most common alternative fuel vehicle at U.S. container ports today The three new programs launched in 2008 will deploy LNG in drayage trucks serving the three California ports. Approximately 18,000 drayage trucks serve the ports of Los Angeles and Long Beach. In March 2008, the ports individually adopted clean truck programs designed to replace highly polluting drayage trucks with cleaner vehicles, including trucks powered by LNG. At the ports of Los Angeles and Long Beach, each TEU of containers passing through either port in either direction will be assessed a $35 fee. In March 2008, the Port of Oakland endorsed a similar clean truck program that, like its counterpart at the two southern California ports, will finance the replacement of several thousand drayage trucks with LNG or clean diesel vehicles, probably financed by a container fee. Electric Vehicles: Coming on Strong Converting cargo handling equipment to hybrid electric drivetrains offers another option to reduce air pollution at ports. Although hybrid electric drivetrains raise vehicle costs substantially, they reduce fuel use, emissions and operating costs. Use of hybrid electric technology at ports is only beginning. Four applications of hybrid electric drivetrains are underway, three launched since the first Energy Futures study was completed. A project to develop hybrid powered cargo handling equipment was launched at Long Beach in September The two-year, $1.2 million project will research, develop, build and test a hybrid yard tractor at the Long Beach Container Terminal s Pier F facility. In September 2007, the EPA announced a second hybrid project to develop and test a new EPA-patented hydraulic hybrid technology on one yard tractor at a PANYNJ container facility in New Jersey. A new project was launched by the PANYNJ in 2008 to deploy two hybrid electric yard tractors at a container terminal in New York. In October 2008, a hybrid electric switching locomotive began operating at the port of Hampton Roads. Foss Maritime Company, a marine transportation company based in Seattle, Washington, announced in March 2007 that it plans to build the world s 18

25 first hybrid electric tugboat. When completed, the Foss hybrid electric tugboat is scheduled to undergo five years of tests at southern California ports. Capacity of Texas, a major manufacturer of yard tractors, has also launched a project to commercialize a plug-in hybrid electric tractor for use at ports. The first pure electric vehicle deployed at a U.S. container port made its debut in The truck, manufactured by Balqon Corporation, was unveiled at the Port of Los Angeles in May In total, the POLA is investing more than $5.6 million to demonstrate the viability of electric trucks. Biodiesel: A Renewable Alternative in the Northwest The two ports of Seattle and Tacoma on Puget Sound in the state of Washington continue to spearhead the use of biodiesel blends in their vehicle fleets. Both ports are located in areas that until 2008 have complied with U.S. national ambient air quality standards for ozone, which affects the choice of biodiesel. Emissions of nitrogen oxide, an ozone precursor, increase with the use of biodiesel, but biodiesel has been shown to reduce emissions of particulate matter. Until recently, particulate matter has been the pollutant of greater concern in the Puget Sound area, but a violation of the federal public health standard for ozone occurred in July 2008 and new EPA pollution control requirements to reduce ozone are likely to apply in the region soon. Several terminals at the port of Seattle use blends of 20 percent biodiesel and 80 percent diesel in their ground vehicles or for their local fishing boats. In early 2006, the port also began using a particularly high concentration of biodiesel in its fleet of 60 to 70 administrative and maintenance vehicles that operate on the docks. During most of the year, the fuel is a blend of 99 percent biodiesel and 1 percent diesel. In 2006, the Husky Terminal, an international shipping terminal at the port of Tacoma, became the first terminal at the port to begin using a biodiesel fuel blend in all of its cargo equipment to reduce air emissions. Cold Ironing with Decentralized or Grid Power: Needed Alternatives In port, the electricity used to power a ship s onboard lights and other non-propulsion equipment is normally generated by the auxiliary engines onboard the ships burning whatever quality diesel is allowed for ships operating in waters near the port. Shore power, often called cold ironing or alternative marine power, is a much cleaner alternative to generating power onboard ships. Major shore power programs based on grid power at container ship berths are underway at the ports of Los Angeles and Long Beach. The program at Los Angeles was launched in November One container terminal is already using grid electricity for cold ironing and a second unit was announced early in In November 2008, the container ship Long Beach Bridge became the first ship to plug into a shore power unit at the Port of Long Beach International Transportation Services Inc. terminal. Los Angeles expects to invest $49 million of public funds in its shore side power program from 2006 through 2011, while investments at Long Beach are predicted to be $130 million. In July 2007, Oakland became the first port in the U.S. to introduce cold ironing technology at a container terminal that produces electricity on the dock using a decentralized natural gas fired generator. The dockside power unit was provided by Wittmar Engineering & Construction, Inc. for a brief demonstration. The Oakland unit is small, about the size of a 40-foot ship container, mobile and cost only about $1 million. In October 2008, a similar LNG cold ironing system was demonstrated at the Port of Los Angeles. 19

26 Government Port Programs Port air pollution has been a major problem that has been largely unrecognized by the federal government and state and local governments outside of California, but this is beginning to change. In 2008, the U.S. Congress debated several port measures and enacted one, with signs indicating that the new administration could elevate port cleanup efforts at the EPA and other federal agencies above its current paltry budget. Meanwhile, California continues to be actively engaged in port issues and in 2008 increased state funds available to finance port cleanups. Federal Government Three of the five recommendations made by Energy Futures in its February 2008 report were aimed at the federal government. These recommendations called for a national port strategy, establishment of an equitable financing structure to pay for port cleanups, and increased participation in international shipping issues related to protecting the environment. As the year unfolded, progress was made on all three fronts. A bill, the Marine Vessel Emissions Reduction Act of 2007 (S. 1499) introduced by Senator Barbara Boxer of California, was debated and passed by the Senate Committee on Environment & Public Works in May. 29 An identical version has been introduced in the House of Representatives (H.R. 2548). The bills would amend the Clean Air Act to direct the U.S. EPA to promulgate regulations that would require marine vessels, 90 percent of which are foreign flagged, to use fuel that contains not more than 1,000 parts per million (ppm) of sulfur in their main and auxiliary engines when cruising in U.S. waters. It would also require the EPA to establish standards for emissions of nitrogen oxides, particulate matter, hydrocarbons and carbon monoxide from engines in oceangoing marine vessels that enter or leave a U.S. port. No other legislative action was taken on these bills in 2008, but the debate marks the beginning of a congressional discussion about the need for a national port policy. Congress was more successful with the Maritime Pollution Prevention Act of 2008 (H.R. 802), which passed both houses and was signed into law in July. 30 The law officially adopted the provisions of the MARPOL Annex VI adopted by the International Maritime Organization (IMO), a division of the United Nations regulating emissions from ships, in September 1997 and entered into force in May 2005 when it was ratified by a quorum of nations. Annex VI set limits on sulfur in international bunkerfuel and established procedures for regions to declare themselves sulfur emission controls areas subject to stricter fuel quality standards. Until passage of H.R. 802, the U.S. could not vote on proposed revisions to the annex. With its passage, the U.S. was allowed to vote at the October 2008 IMO meeting in London in favor of proposed amendments to MARPOL Annex VI significantly tightening fuel quality standards for marine fuel. This issue is discussed in more detail in chapter 3. The total cost for reducing air pollution at container ports in the U.S. will be huge. Energy Futures estimates that more than $20 billion will be needed nationwide by 2020, or roughly $1.5 billion per year. To meet these needs, full use of all traditional funding sources, including government funds, will be necessary. In 2008, two bills were introduced in Congress to establish a $25 container fee that would be collected by U.S. port authorities for every TEU of containers handled by the ports. The fees would total over $1.1 billion each year, which would be transferred to the federal government and dispensed to finance goods movement, port security and environmental protection projects. One bill was introduced early in 2008 by Rep. Ken Calvert and a second bill was introduced in September by Rep. Laura Richardson. 31 Neither bill was enacted in Meanwhile, the EPA finalized regulations in March 2008 to reduce emissions from locomotives and small marine engines. 32 When fully implemented, these new standards will reduce particulate matter from locomotive and marine diesel engines by 90 percent and reduce nitrogen oxide emissions by 80 percent. The new standards apply to all types of diesel locomotives and a wide range of small marine 20

27 vessels, including ferries, tugboats, and all types of marine auxiliary engines. The main engines powering large ships, including container ships, are not covered by the regulations, however. The EPA also continued to disburse small grants in 2008, mostly for diesel emission reduction retrofits, through its CleanPorts USA program. The State of California The state of California has been heavily involved for several years in port cleanup programs for its major container facilities in Los Angeles, Long Beach and Oakland. Most of its regulatory efforts have taken place at the California Air Resources Board (CARB). CARB s major work in 2008 focused on its marine vessel rule adopted in July. 33 The rule requires auxiliary and main engines onboard about 2,000 oceangoing vessels visiting California each year to burn lower sulfur marine distillates rather than the highly polluting bunkerfuel when operating within 40 nautical miles of the California coast. Implementation will occur in two steps, ending in 2012 with sulfur limits for marine vessels capped at 1,000 ppm of sulfur. The new rules are the strictest fuel quality rules for oceangoing ships adopted anywhere in the world. 34 An earlier CARB marine vessel rule that applied only to auxiliary marine engines was struck down in February 2008 by the federal 9 th Circuit Court of Appeals in a lawsuit brought by the Pacific Merchant Shipping Association. 35 That regulation has been superceded by the broader July 2008 rule. In other CARB actions, in December 2007 the agency proposed a regulation that will require operators of container, passenger and refrigerated cargo ships to turn off their auxiliary engines while their ships are docked in port. 36 The rule will affect almost 95 percent of the ship visits in these three categories. Once docked, operators would be expected to receive their electricity from shore-based sources or meet percentage reductions through other means. It will require nitrogen oxide and particulate matter reductions of 10 percent from berthed ships in 2010, rising to 80 percent in The regulation is expected to reduce diesel and smog-forming emissions from docked container, passenger and reefer ships by nearly 50 percent relative to levels otherwise expected to be emitted in 2014, and 80 percent by A second regulation proposed in December 2007 is aimed at cleaning up emissions from the aging fleet of diesel trucks that hauls goods to and from ports and rail yards throughout the state. 38 Phase one requires all pre-1994 drayage truck engines be retired or replaced with 1994 and newer engines by the end of In addition, trucks with engines built between 1994 and 2003 will need to be either replaced or retrofitted to achieve an 85 percent reduction in diesel particulate matter by the same deadline. The second phase of the regulation requires all drayage trucks to meet 2007 emissions standards by the end of These regulations have already been adopted locally at the ports of Los Angeles and Long Beach. The state of California also began disbursing more than $1.0 billion in public funds for environmental programs at ports raised through Bond 1B the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 approved by the voters in November Another $2 billion was provided by the bond to finance projects to improve port infrastructure. One of the first disbursements involved $98 million in bond funds awarded to the ports in Los Angeles and Long Beach to finance drayage truck cleanup efforts. 39 For several years, the California legislature has been debating a strategy that could raise money for port cleanup. Senate Bill (SB) 760 passed the California legislature in September 2006, but was vetoed by Governor Arnold Schwarzenegger. In 2008, a second container fee bill, SB 974, was passed by a wide margin in the legislature, but was again vetoed by the governor. The bill would have established a $30 per container fee for all containers unloaded at California ports. Half the estimated $300 million that would be collected annually would have been allocated to fix rail crossings that increasingly delay traffic due to the growing volume of trade from the ports. The other half would have been reserved for projects to reduce air pollution generated by port operations and container transportation

28 Chapter 3: Container Port 2008 Profiles This chapter includes updated profiles of each of the top ten U.S. container ports including information about new port air pollution control programs initiated since research was concluded for the February 2008 Energy Futures report. The profiles also include port operating data, such as volumes of TEU traffic, in 2007, the latest year for which annual data are available. 22

29 Profiles: PORTS OF LOS ANGELES AND LONG BEACH The adjacent ports of Los Angeles and Long Beach, individually the two largest container ports in the U.S., together handle more than 15 million TEUs of containers each year, roughly one-third of all containerized trade in the U.S. Taken together, the ports are the fifth largest container port in the world. Containerized cargo moving through the ports is projected to more than double by the year The two ports are landlord ports managed by municipal harbor commissions. The Port of Los Angeles (POLA), located 20 miles south of downtown Los Angeles, is currently the largest container port in the U.S. 41 As shown in Table 3, in 2007, the port handled 8,355,039 million TEUs of containers, down 1.4 percent from the 8,469,853 million TEUs handled in This was the first decline in container traffic experienced at POLA since Over the past decade, however, POLA container traffic has risen percent, well above the average growth of 92.6 percent for the top 10 container ports and second only to the growth at the Port of Savannah. Table 3 PORT OF LOS ANGELES Port Characteristic Description National Ranking st Port Commission Port of Los Angeles (POLA) Operating Revenue (2007) $417.2 million Landlord or Operator Landlord TEUs ,469,853 TEUs ,355,039 Percent Growth 2006 to % Percent Growth Over Past Decade 147.3% Percentage by Truck/Rail 80%/20% Number of Container Terminals 8 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity Yes Alternative Fuel Onroad Trucks Yes Alternative Fuel Rail Engines Yes The Port of Long Beach (POLB), which is located directly to the east of POLA, is the second busiest container port in the U.S. 42 Table 4 shows that, in 2007, the port handled 7,316,465 million TEUs of containers, up a slight 0.4 percent from the 7,289,365 million TEUs handled in Over the past decade, POLB container traffic has risen 78.6 percent. 23

30 Table 4 PORT OF LONG BEACH Port Characteristic Description National Ranking nd Port Commission Port of Long Beach (POLB) Operating Revenue (2007) $353.3 million Landlord or Operator Landlord TEUs ,289,365 TEUs ,316,465 Percent Growth 2006 to % Percent Growth Over Past Decade 78.6% Percentage by Truck/Rail 80%/20% Number of Container Terminals 5 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity Yes Alternative Fuel Onroad Trucks Yes Alternative Fuel Rail Engines Yes The POLA and POLB are located in the South Coast Air Basin, which has the worst air quality in the U.S. The effects of air pollution on the health of local citizens has been a key driving force behind port cleanup efforts this decade. In January 2008, the South Coast Air Quality Management District (SCAQMD) released results from its third Multiple Air Toxics Exposure Study (MATES III), which further raised concerns about the impact of emissions from the ports. The MATES III analysis concluded that, on average, Los Angeles residents are exposed to a lifetime cancer risk from toxic air pollution of 1,200 in one million, one of the highest risks in the country. Diesel exhausts account for approximately 84 percent of regionwide cancer risk. The highest computer modeled risk level was found in areas nearest the port, where the lifetime cancer risk soared to 2,900 in 1 million. 43 For most of this decade, POLA and POLB have collaborated to develop current air pollution control strategies and programs. Both ports adopted a joint San Pedro Bay Ports Clean Air Action Plan (CAAP) on November , at the first joint meeting of both commissions ever held. 44 The overall goal of the CAAP is to reduce air pollution at the POLA and POLB by at least 45 percent within five years. In May 2008, the EPA awarded the CAAP one of its Clean Air Excellence Awards for its ambitious approach to reducing air pollution from the ports. 45 The CAAP addresses every category of port-related emissions sources ships, trucks, trains, cargo handling equipment and harbor craft and outlines a dozen programs to reduce air pollution at every sector of port operations. Many programs are being simultaneously implemented at both ports. Others are confined to just one port, but are jointly managed and funded. In only a few cases do port cleanup programs differ between the two ports. Because of the linked nature of their cleanup efforts, the profiles for POLA and POLB are combined into a single profile. 24

31 The earlier Energy Futures report found the POLA and POLB to be far and away the most aggressive U.S. container ports in deploying alternative fuels and advanced propulsion technologies to reduce air pollution. The report cited a number of projects to bring natural gas into cargo handling and regional truck fleets, to bring hybrid electric vehicles technology into several port operations, and to use grid electricity to provide shore power to ships while at berth. In 2008, these programs have continued and new programs have been launched. As a result, the two ports clearly remain the leaders in controlling air pollution at container ports in the U.S. and arguably in the world at large. The major alternative fuel and advanced technologies programs now underway are discussed below. Clean Truck Programs The most ambitious new component of the CAAP to be implemented in 2008 is the Clean Truck Program, which aims to replace or upgrade all 18,300 onroad regional trucks serving the ports. These trucks, commonly called drayage trucks, account for around 80 percent of all truck traffic at the ports. According to the CARB, air pollution from onroad trucks is responsible for more than half of the 2,400 premature deaths occurring annually in California due to freight movement. 46 More than 80 percent of the regional trucks are old and driven by independent truck drivers, many of whom earn less than $30,000 per year, working largely without employee benefits or business cash reserves. The two ports have committed over $200 million to help drivers replace and retrofit their trucks over the next five years. The current cost projections call for a total investment from all funding sources of more than $1.8 billion on heavy duty vehicle replacements or upgrades. The first specific steps in creating the Clean Truck Programs came in November 2007 when the harbor commissions for the two ports voted to ban the oldest, dirtiest trucks from operating at the ports and to establish a new port tariff that will gradually limit access to the ports to only the cleanest vehicles. 47 The schedule is: October 1, 2008: All pre-1989 trucks were banned from port service January 1, 2010: trucks will be banned along with unretrofitted trucks January 1, 2012: All trucks that do not meet the 2007 federal emission standards will be banned In December 2007, both harbor commissions approved cargo fee tariffs to accelerate the replacement of the existing truck fleet by assessing a $35 gate fee per TEU to generate funds to help underwrite the replacement of the existing truck fleet. In 2008, the two ports selected PortCheck, Inc. to collect the fees. Implementation of the Clean Truck Fee was scheduled to begin on November 17, 2008, but its launch was delayed by both ports until the proper documentation is filed before the Federal Maritime Commission. 48 Early in 2008, the harbor commissions of the POLB and the POLA each adopted versions of the Clean Truck Program, which share the same objectives, but differ somewhat in the implementation strategy. The POLA Clean Truck Program will require licensed motor carriers (LMCs) to enter into concession agreements with the port. The LMCs will be responsible for owning and maintaining the trucks and must commit to using employee drivers for port drayage by By working with LMCs that have direct control over employee drivers, the POLA believes it can effectively ensure that trucks meet cleanup requirements. The POLB Clean Truck Program includes many of the provisions of the POLA plan, with a key exception regarding driver employment. The POLB plan permits independent contractor drivers or a combination of employee and contractor drivers to continue to service the port. There is no requirement that drivers work for approved LMCs. Independent truck drivers can individually apply for financial assistance and for licenses to enter the port

32 The POLA plan envisions that concessionaires will be more accountable for following truck maintenance and safety standards, so their trucks will continue to generate lower emissions and retain maximum value over the long haul. The POLA estimates that the cost of replacing the present truck fleet will raise the price shippers pay to move their cargo through the ports by an incremental cost of $500 million compared to plans that do not require direct employee hiring by concessionaires. Even so, the additional cost of the POLA plan is still less than the externalized, public-borne costs of between $500 million and $1.7 billion annually that are offset by a transformed drayage market, according to an analysis by the Boston Consulting Group. 50 The differences between the two port plans regarding treatment of independent truckers have been very controversial. On the one hand, the Coalition for Clean & Safe Ports, a coalition of dozens of environmental, community, faith based and labor organizations, has been critical of the POLB plan for allowing continued access to the ports by independent truckers. The coalition believes that independent drivers are too poorly paid to raise the capital needed to purchase and maintain a new clean technology truck. It supports the POLA plan instead, believing it will increase the operational efficiency of the truck fleet, improve port security, enhance public safety and reduce neighborhood congestion. 51 On the other hand, the American Trucking Association (ATA) filed suit in the U.S. District Court in the Central District of California on July 28 claiming the POLA Clean Truck Program illegally favors large fleets over independent truckers and reduces competition by limiting access to the ports by certain trucks. 52 In September the federal court refused to grant an injunction sought in the ATA lawsuit to block implementation of the Clean Truck Program. The POLA and POLB officially dedicated the Clean Trucks Center on Terminal Island in August. The center is a complex of temporary offices where licensed motor carriers and independent owner operators can apply for grants and leases for new trucks, register for their transportation worker identification card, apply for financial assistance, and learn about the services that the ports provide for the drayage industry, such as the POLB s Healthy Drivers health insurance program. 53 Figure 5 LNG truck station infrastructure expands to fuel estimated 1,000s of natural gas trucks at ports. The ports are jointly providing financial assistance to accelerate the transition to clean trucks through three financing plans: a lease-to-own program, grants for the purchase of a new truck and grants to retrofit an older truck. Under the lease-to-own program, an applicant can exchange an old truck for a pre-approved new truck under a seven-year lease agreement. The monthly lease payment under this option will be $500 to $600 for a clean diesel truck and $500 to $1,000 for an alternative fuel truck. At the end of the lease term, the ports will provide a subsidy towards the purchase of the truck for the lessee, 50 percent of the remaining balance or about $7,500 for a diesel truck and $13,000 for an alternative fuel truck. With the grant program, an applicant can exchange an older truck for a pre-approved new truck with a grant from the port to cover up to 80 percent of the cost of the truck. Under the third option, grants for engine retrofits, the ports will provide a grant of as much as $20,000 towards the purchase of qualifying retrofit equipment for model year 1994 to 2003 trucks

33 On August 15, the first concession application deadline passed. By that time, the POLA had already received processing applications from roughly 40 LMCs collectively representing more than 2,000 trucks. These companies currently operate at the port and together could generate more than one million annual truck visits to the port. When combined with other companies that have submitted letters of intent, the POLA has commitments for at least 4,000 trucks. 55 Two of the companies submitting letters of intent were Swift Transportation, Inc., and Knight Transportation, major national motor carriers based in Phoenix, Arizona. Their pool of 2,000 trucks will meet EPA 2007 diesel emissions standards using a mix of clean diesel and LNG trucks. 56 The largest LNG production plant in western United States was built and began delivering fuel in 2008 to supply the Clean Truck Program. It can produce 160,000 gallons of LNG per day and is designed to increase volume to 240,000 gallons per day. The Clean Truck Programs at the POLA and POLB are clearly the biggest single efforts to reduce air pollution at any container port in the world. They promise to reduce air pollution from more than 18,000 highly polluting trucks by an average of 85 percent within five years. The programs also create a major opportunity for alternative fuel and advanced technology vehicles to enter the port transportation market. So far, natural gas has been most successful in capitalizing on this opportunity, although a single battery electric truck has recently entered the port truck fleet as well. Westport Innovations Inc. has been developing its 400 and 450 horsepower, 15 liter natural gas engine through a $10 million project funded by itself and the POLA, POLB, the South Coast Air Quality Management District (SCAQMD), the California Energy Commission, Clean Energy and Kenworth Truck Company. 57 Natural gas first entered the port truck market in June 2007 when the SCAQMD awarded a $2.9 million contract to deploy 20 LNG heavy duty engines in drayage trucks serving the ports. Under the contract to Total Transportation Services Inc. (TTSI) of Los Angeles, TTSI promised to replace 20 of its pre-1990 trucks with Kenworth T800 trucks equipped with LNG engines manufactured by Westport Innovations Inc. The funding support for TTSI s LNG vehicle acquisition is $144,000 per truck. By August 2008, eight LNG trucks were in service as part of the TTSI fleet. The company expected to place 30 more into service by early A second natural gas truck project was launched in 2008 by Southern California Gas Company. The company announced plans in February to deploy five Autocar trucks powered by compressed natural gas (CNG). The trucks will be operated by California Cartage Company, powered by Cummins ISL-G engines and refueled at a CNG station built near the port by Trillium. 59 The one-year demonstration was launched on December 2, 2008, when the first CNG drayage truck entered service at the POLA. The demonstration project s overall cost is about $1.7 million. The ports each contributed about $112,000, with $1.1 million more coming from SoCal Gas and $421,000 from the SCAQMD. 60 A third project, which was funded by the South Coast Air Quality Management District and California Air Resources Board, deployed LNG trucks manufactured by Sterling Truck Company. These trucks feature the Cummins-Westport ISLG engine which is the only heavy duty engine that meets the US Figure 6 World s largest LNG truck fueling station by Clean Energy to serve ports will open in April

34 EPA 2010 emissions standard. A total of 132 trucks will be deployed under this project by local drayage company California Cartage. By the end of 2008, a fleet of almost 200 natural gas trucks manufactured by Kenworth, Sterling, and Autocar were servicing the Ports of Los Angeles and Long Beach. In May 2008, the POLA and the SCAQMD unveiled the world s most powerful electric truck. 61 Built as a demonstration vehicle with $527,000 contributed by the port and the SCAQMD and designed specifically for short haul drayage operations, the heavy duty electric truck can pull a 60,000 pound cargo container at a top speed of 40 miles per hour and has a range between 30 to 60 miles per battery charge. The battery charger can recharge up to four electric trucks simultaneously in four hours and can also provide up to 60 percent of the charge in one hour to meet peak demands during daily operations. On a kilowatt hour of energy cost basis, the electric truck costs roughly $0.20 per mile to operate, compared to four to nine times as much for a conventional diesel truck. Annual fuel savings per truck could be $35,000 or more. Moreover, if the 1.2 million truck trips made annually by port trucks were to be made with electric trucks, the POLA staff estimates that 35,605 tons of tailpipe emissions would be eliminated, including 22 tons per year of particulate matter and 428 tons of nitrogen oxides emissions. In total, the POLA is investing more than $5.6 million to demonstrate the viability of electric drayage trucks. The next stage in the project will include the production of five additional electric trucks at a cost of $208,500 each. Balqon Corporation, the truck manufacturer based in nearby Santa Ana, expects to open an assembly plant in the Harbor City area of Los Angeles to produce more trucks. In exchange for grant money from the POLA and the SCAQMD to build the first truck, Balqon will provide a royalty payment to the POLA for each vehicle it sells or leases worldwide. Cargo Handling Equipment There have been four projects at the POLA and POLB to test LNG in offroad yard tractors. One has been completed and the other three are continuing. The three ongoing projects include one launched in September 2005 at YTI Terminals in the POLA. This project currently includes two LNG yard tractors. Another yard tractor fleet involving 10 vehicles entered service in May 2007 and is still being tested at a rail yard owned by the BNSF Railway Company serving the ports. The final project, involving three yard tractors, was launched in October 2007 at the ITS terminal at the POLB. The project that has been completed was launched in June 2006 at the Long Beach Container Terminal at the POLB. It tested three LNG yard tractors. The three yard tractors, equipped with Cummins C Gas Plus 8.3 liter natural gas engines, were tested at the POLB through January 2007 alongside eight conventional diesel tractors. A final report in March 2008 concluded that 67 percent of the drivers rated the LNG tractors as superior to their diesel counterparts. The LNG tractor emitted fewer nitrogen oxide and particulate matter emissions than offroad diesel tractors, but they used 30 percent more diesel equivalent gallons of natural gas fuel. 62 In September 2006, the POLB launched a Hybrid Yard Hostler Demonstration and Commercialization Project to develop, build and test a hybrid electric yard tractor. The test phase will be conducted at POLB s Long Beach Container Terminal s Pier F facility. The EPA has contributed $300,000 to the project and the two ports have added $375,000 each. Kalmar, Long Beach Container Terminal and the hybrid technology supplier will provide an additional $150,000 in services. The total project cost is expected to be about $1.2 million. 63 In the fall of 2008, US Hybrid, based in Torrance, California, was selected to convert three Kalmar yard tractors to hybrid electric drivetrains. The first prototype is scheduled for delivery in mid In April 2008, the POLA approved the production of 20 electric yard tractors. The tractors, expected to cost $189,950 each, will be deployed in the port as part of a green terminal program. 65 In May 2008, the POLB approved two grants of $2.5 million each to help fund the electrification of 28 diesel 28

35 powered rubber tire gantry cranes by the end of All 71 of the large, stationary ship-to-shore cranes at the POLB are already electrified. 66 In September 2008, Railpower Technologies Corp., headquartered in Brossard, Quebec, Canada, announced that Long Beach Container Terminal, Inc. had purchased one hybrid electric EcoCrane power plant for a rubber tire gantry (RTG) crane with an option for five additional units. 67 The EcoCrane will replace a conventional generator set, reducing fuel consumption and emissions by up to 70 percent when compared to conventional units. Railpower completed a demonstration project in March at a Terminal Systems, Inc. site at the port of Vancouver, Canada, of one EcoCrane. 68 Shore Power The ongoing POLB shore side power program for berthed ships is referred as cold ironing, while the POLA program is called alternative maritime power (AMP). Most shore power proposed for the two ports is currently projected to be based on grid power rather than power generated on the dock. The AMP program at POLA was launched in November 2002 and China Shipping has been using grid power at its terminal for several years. In 2008, a new AMP unit project was announced by China Shipping as part of its terminal expansion project that will triple its TEU capacity by The POLA plans to have 15 container and cruise berths operational with AMP within five years. The POLA expects to invest $49 million of public funds into its AMP program from 2006 through On November 11, 2008, the container ship Long Beach Bridge became the first ship to plug into a shore power unit at the POLB s International Transportation Services Inc. terminal. The unit is part of an $8 million shore power project to provide electricity at all berths at Pier G. Southern California Edison, the local utility company, has already built a substation to accommodate the increased electrical demand from docked ships. 70 Over the next five years, the POLB plans to have nine container berths operational with shore power as the result of investments of $130 million. A second cold ironing technology, based on decentralized power from an LNG fueled generator at the berth, was demonstrated in October MOL, a global shipping company, and CleanAir Logix, Inc., based in Oakland, California, successfully tested a shore power supply system on the container ship MOL Enterprise at the POLA. Electricity was supplied to the ship, which has a capacity of 4,500 TEUs of containers. CleanAir Logix used a Wittmar DFMV Cold Ironing system also demonstrated at the Port of Oakland in July Power was connected from an onshore generator that runs on LNG. In 2008, CleanAir Logix and Wittmar merged. Tugboats Foss Maritime Company, a marine transportation and logistic services company based in Seattle, Washington, announced plans in March 2007 to build the world s first hybrid electric tugboat, after receiving a pledge of $850,000 for the project from the POLA in association with the SCAQMD. Foss has agreed to station the new tugboat in southern California for five years. The Foss hybrid electric tugboat is scheduled to be delivered to the POLA for testing in In May 2008, Foss Maritime received a Clean Air Excellence Award from the U.S. EPA for the development of the hybrid electric tugboat

36 Oceangoing Ships Ships operating in the waters near Los Angeles and Long Beach are subject to CARB fuel quality regulations that were strengthened in July In addition, both ports have conducted a voluntary program launched in May 2001 that requests vessels to reduce their speed to 12 knots at a distance of 20 nautical miles from the ports. Ship owners that achieve a 90 percent compliance rate with the speed reduction program, called the Green Flag program, are eligible for a 15 percent reduction in dockage fees. In March 2008, POLA and POLB launched a voluntary fuel incentive program for a one year test from July 1, 2008, to June 30, The switch to low sulfur fuel is projected to reduce sulfur dioxide emissions from ships by 11 percent and particulate matter by 9 percent while they are operating near the ports. The ports agreed to pay the difference in the cost of bunkerfuel and the cleaner distillate fuel for participating ship owners during this period. The cost to the ports is estimated to be $9.9 million to POLB and $8.6 million to POLA to pay the $400 per metric ton differential between bunkerfuel and cleaner middle distillate fuels. By the end of October, 29 percent of ship trips were participating in the program. 74 Climate Change The POLA was designated a Climate Action Leader in January 2008 by the California Climate Action Registry, becoming the first port in the state with this distinction. The status was granted after the POLA 2006 baseline greenhouse gas (GHG) emission inventory was submitted to and accepted by the registry, a nonprofit partnership that promotes early actions to reduce GHG emissions. 75 The POLA is currently developing a comprehensive Climate Action Plan intended to cover both port and tenant operations with the intent of meeting the aggressive GHG reduction goals of California s Global Warming Solutions Act of In April, the POLB signed an environmental exchange agreement with the Port of Rotterdam, Europe s largest container port. The agreement was signed during a two-week European tour by a delegation including the mayor of Long Beach and several municipal and port officials. In 2007, the POLB signed a similar agreement with the Yantian International Container Terminals at the port of Shenzhen in China. 77 In July, the executive directors of POLA and POLB traveled to the port in The Netherlands to participate in the C40 World Ports Climate Conference. They joined other attendees in signing the World Ports Climate Declaration, committing to take further actions to reduce GHG emissions

37 Profile: PORT OF NEW YORK AND NEW JERSEY In addition to three container terminal sites in New Jersey and New York, The Port Authority of New York and New Jersey (PANYNJ) manages three of the region s major airports, a regional rail line connecting New York and New Jersey, a major bus terminal, several bridges and tunnels, and the World Trade Center reconstruction project. In 2007, the PANYNJ had total gross revenues of $3.2 billion, far more than any other agency managing a U.S. container port, although only $236 million in revenue was obtained by its port-related operations. In 2007, the PANYNJ retained its rank as the third largest container port in the U.S. As shown in Table 5, it handled 5,299,105 TEUs of containers, up 4.1 percent from the 5,092,806 TEUs of containers handled in Business at the port increased percent over the decade from 1998 through Table 5 PORT OF NEW YORK/NEW JERSEY Port Characteristic Description National Ranking rd Port Commission Port Authority of New York and New Jersey (PANYNJ) Operating Revenue (2007) $3.2 billion Landlord or Operator Landlord TEUs ,092,806 TEUs ,299,105 Percent Growth 2006 to % Percent Growth Over Past Decade 114.9% Percentage by Truck/Rail 87%/13% Number of Container Terminals 7 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No The port projects another doubling of container capacity by It is currently in the middle of a $2.0 billion capital investment program to improve and enlarge the terminal sites in New York and New Jersey. It expects to grow by an annual rate of 7 percent and to handle 6.4 million TEUs of containers by 2010 and 10 million TEUs by About 6,000 trucks leave the port terminals each day carrying containers. Only 13 percent of the containers now leave by rail. A $600 million Rail Express program is underway that will increase rail traffic to 1.5 million containers per year, or 20 percent of all ship containers projected for that time. The first phase of the project, the ExpressRail Facility at Port Elizabeth, was completed in October It increased the rail capacity of the Elizabeth terminal from 338,884 containers in 2006 to 358,043 containers in The PANYNJ has had an active environmental control program for more than a decade and has won environmental awards in 2003 and 2005 from the American Association of Port Authorities for its efforts. It was one of the first port authorities to implement an Environmental Management System, which covers activities at its public berths and maintenance facilities as well as dredging operations. Since 2000 the PANYNJ has completed air emission inventories to quantify the contribution of each port-related sector to overall emissions by pollutant in the region, and working with its tenants has undertaken several initiatives to reduce port related air emissions. It has switched cargo handling equipment vehicles from 31

38 32 conventional to ultra low sulfur diesel fuel ahead of EPA requirements that it do so. The pressure to reduce air pollution at the container ports in New York and New Jersey is growing, and the PANYNJ is responding with an expanded program. Because the area currently violates EPA air quality standards for ozone and particulate matter, the port cannot expand without instituting pollution reductions to offset increases in emissions from new activities. For example, offsets are currently needed to allow a major harbor dredging project underway in New York Harbor to continue. The dredging is needed to deepen the waterway to accommodate new, larger container ships requiring a water depth of up to 45 feet visiting the port. The state of New Jersey is also creating new pressure to reduce air pollution from the container ports in the state. In April 2008, the New Jersey Clean Air Council (CAC) held a public hearing in Trenton on methods to improve air quality at the seaports and airports in the state. The CAC was formed in 1954 as an advisory board to provide annual recommendations to the state Department of Environmental Protection concerning ways to reduce air pollution from a particular sector of the state s economy. Its topic for 2008 was ports. 80 Among the local public interest groups testifying at the hearing were the NJ Work Environment Council, the NJ Environmental Federation and Change to Win. They cited the high cancer rates among residents living near New Jersey ports in their calls for increased regulation of port activities to reduce air pollution. 81 The Commissioner of the New Jersey Department of Environmental Protection testified that diesel emissions present the greatest cancer risk in New Jersey and the communities near Newark Liberty International Airport have the highest asthma-related deaths in the state. The commissioner also noted Port emissions will continue to grow that is the trend we must try to stem. 82 In July 2008, the CAC released a summary of its recommendations in a report, Improving Air Quality at Our Ports & Airports. Regarding container ports, the CAC recommended establishment of a clean truck program for regional port trucks, requiring ships to switch to cleaner fuels, and use of cleaner fuels and technologies to reduce air pollution from cargo handling equipment operating at port terminals. No other actions were taken in 2008, however. In September 2007, the PANYNJ launched a project to develop and test a new EPA-patented hybrid technology on cargo handling equipment at a container facility in Elizabeth, New Jersey. 84 The hybrid yard tractor will be equipped with a diesel hydraulic system developed at the EPA laboratory in Ann Arbor, Michigan, that will combine the cleanest available diesel engine technology with components that use hydraulic fluid compression to store energy. The hydraulic hybrid technology is expected to improve the fuel efficiency of the yard tractor by 50 to 60 percent, reduce or eliminate emissions during idling, and decrease brake wear. The demonstration project will try to prove the effectiveness of hybrid hydraulic technologies on yard hostlers. The goal of the hydraulic hybrid yard tractor project is to develop a hybrid drive system that will include a diesel engine that meets the 2010 EPA onroad truck emission standards. Other partners in the project include APM Terminals, Kalmar Industries, Parker Hannifin Corporation and the Port of Rotterdam in The Netherlands. The hydraulic hybrid yard tractor will be field tested at the APM container terminal in Elizabeth, New Jersey. 85 In early 2008, the PANYNJ embarked on a second hybrid yard tractor project. In this effort, two yard tractors will be equipped with hybrid electric drivetrains and tested at the New York Container Terminal in Staten Island, New York. Project participants include the New York Power Authority, the state Energy Research & Development Authority and Region II of the U.S. EPA. 86 In 2008, the PANYNJ also stepped up its participation in international climate change issues. In March, the PANYNJ Board adopted a goal of carbon neutrality from its operation by It will offset future growth in carbon emissions, now estimated to be 298,000 metric tons annually, through new investments elsewhere in its operations that will reduce carbon emissions by at least an equal amount. The PANYNJ also participated in the July 2008 document signing ceremony in Rotterdam, The Netherlands, endorsing the World Port Climate Declaration. 88

39 Profile: PORT OF SAVANNAH The Port of Savannah is located more than 20 miles up the Savannah River from the city of Savannah. It is operated by the Georgia Port Authority (GPA). As shown in Table 6, the port handled a total of 2,604,312 TEUs of containers in It was the fastest growing among the top 10 container ports for the second consecutive year, growing 20.6 percent from This growth allowed Savannah to bypass Oakland to become the 4 th largest U.S. container port in The annual number of containers handled at Savannah grew by percent from 1998 through 2007, exceeding by far the growth rate of the other top container ports in the U.S. Table 6 PORT OF SAVANNAH Port Characteristic Description National Ranking th Port Commission Georgia Port Authority (GPA) Operating Revenue (2006) $205.0 million Landlord or Operator Operator TEUs ,160,168 TEUs ,604,312 Percent Growth 2005 to % Percent Growth Over Past Decade 256.5% Percentage by Truck/Rail 82%/18% Number of Container Terminals 2 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No The Garden City Terminal at the port of Savannah is the largest single container facility along the East and Gulf coasts. 89 The GPA is currently implementing a 10-year, $900 million port upgrade scheduled to be completed in Docks are being expanded, new cargo handling equipment is being deployed and an additional 100 acres of paved storage area is being built. According to Robert Morris, Director of External Affairs, the GPA plans to triple its capacity threefold to 6.5 million annual TEUs, without expanding the boundaries of the Garden City terminal site, within a decade. 90 Since air quality in Savannah currently complies with all federal public health standards, pressure to make significant air pollution reductions is not great. In March 2008, however, a project to electrify all 17 cargo cranes to grid power was completed. These cranes are used to remove containers from the ships and reload them before departure. The cranes reduce diesel fuel use at the port terminal by more than one million gallons per year. They also operate more efficiently because they are able to capture and reuse about one-third of electricity consumed when lifting containers off the ships when the containers are lowered to the dock. The electric cranes emit 615 fewer tons of nitrogen oxides and 12.4 fewer tons of particulate matter than the diesel cranes they replaced

40 34 Another program involves replacing old cargo handling trucks with larger, but more efficient rubber tire gantries. By 2018, the GPA also intends to have 91 electric powered rubber tire gantries in place, cutting its fleet of diesel top pickers from 68 to 35. As a result of the crane electrification and the rubber tire gantry replacement program to date, the total diesel fuel use to process a one TEU container at the Garden City terminal has dropped from 1.44 gallons of diesel fuel in 2002 to 0.89 gallons in In June 2008, the GPA completed conversion of its entire fleet of yard cranes, trucks and other cargo handling equipment to ultra low sulfur diesel, cutting diesel emissions at the port by 10 percent. 93 During the five years from 2002 to 2007, rail volumes at the Garden City terminal increased by 135 percent. In 2008, another 6,000 feet of new track were added to the rail onsite depot. About 235,000 TEUs of containers left the Garden City terminal by rail in 2007, or an average of 17 trains per week. About 18 percent of all TEUs unloaded at the port of Savannah leave the port by rail. The GPA estimates that its use of rail reduces particulate matter emissions by more than 90,000 tons per year, compared to use of trucks. 94 In August 2008, the GPA became one of five U.S. ports to be selected by the AAPA and the Global Environment & Technology Foundation to participate in the Port Environmental Management System Assistance Project. This program will train GPA environmental staff how best to analyze and control the environmental consequences of its activities. The four-phase training program will take 18 months to complete. 95

41 Profile: PORT OF OAKLAND The Port of Oakland, established in 1927, includes eight container terminals and two intermodal rail facilities. The maritime division of the port leases the container terminals and other facilities for railroad and trucking operations. The Board of Port Commissioners is appointed by the City Council. It operates as a municipal government agency. Oakland is the 5th largest container port in the U.S. and the 3 rd largest in California. As shown in Table 7, in 2007, Oakland handled 2,388,182 TEUs of containers, down slightly from 2006, when it handled 2,390,262 TEUs of containers. During the year, Oakland dropped one notch from the 4 th largest port position, as soaring container traffic at the Port of Savannah allowed it to surpass Oakland. Overall, container volumes at Oakland grew 51.6 percent over the decade from 1998 through The port projects a doubling of container capacity by Table 7 PORT OF OAKLAND Port Characteristic Description National Ranking th Port Commission Port of Oakland Operating Revenue (2007) $277.4 million Landlord or Operator Landlord TEUs ,390,262 TEUs ,388,182 Percent Growth 2005 to % Percent Growth Over Past Decade 51.6% Percentage by Truck/Rail 75%/25% Number of Container Terminals 8 Alternative Fuel Cargo Handling Equipment No Cold Ironing Capacity Yes Alternative Fuel Onroad Trucks Yes Alternative Fuel Rail Engines No Pressure to reduce air pollution at the Port of Oakland has been intense for most of the last decade. Several community and environmental groups have been active in opposing port expansion plans without strong environmental safeguards. The environmental staff now numbers about 20 employees. In 2008, the status of the environmental program was elevated to the division level, with the appointment of Richard Sinkoff as the Director of Environmental Programs and Planning by the Board of Port Commissioners in July. 96 The pressure to reduce air pollution in Oakland has increased dramatically since the release of the earlier Energy Futures study. In December 2007, the Coalition for Clean & Safe Ports joined the Natural Resources Defense Council to publish a report, Truck Drivers Face Elevated Health Risks from Diesel Pollution, which highlighted occupational risks to truck drivers at the port. The report found that truck drivers often experience air pollution levels 10 times higher than background levels outside truck cabs. 97 Background levels themselves are often very high. A report from the East Bay Alliance for Sustainable Economy a few months earlier, Taking the Low Road: How Independent Contracting at the Port of Oakland 35

42 36 Endangers Public Health, Truck Drivers & Economic Growth, concluded that residents living near the port have a life expectancy more than a decade shorter than residents in the nearby Oakland Hills. 98 The American Lung Association has calculated that one in five children living in West Oakland near the port has asthma, and that the area has the highest asthma hospitalization rates in California. 99 Another key event in March 2008 was the release of an updated version of a 2005 marine emission inventory by the Port of Oakland. 100 The inventory identified oceangoing ships as the source of more than 80 percent of sulfur dioxide emissions from all port activities and the major source of four other major pollutants as well. Cargo handling equipment and regional trucks were also major sources of particulate matter and nitrogen oxides pollution. The Port of Oakland has joined four other Bay Area ports and other government and environmental organizations to form a steering committee to develop a regional strategy to monitor and reduce maritime air pollution in the region. 101 The CARB and the Bay Area Air Quality Management District (BAAQMD) in San Francisco released another analysis in 2008, which concluded that significant diesel related health risks were being faced daily by residents of West Oakland, California, adjacent to the port of Oakland. The report, Diesel Particulate Matter Health Risk Assessment Study for the West Oakland Community: Preliminary Summary of Results, found that residents living in the area have a three to four times higher risk of getting cancer than people living elsewhere in the San Francisco Bay Area. The study found that the largest contributor to the risk is from particulate matter emissions from diesel trucks, accounting for 71 percent of the total cancer risk. The major portion of this risk comes from the diesel trucks on the freeways surrounding West Oakland. A separate CARB analysis evaluated the noncancer health impacts resulting from the port-related diesel particulate matter emissions using epidemiological studies. For the entire study area, the results showed that annually there would be potentially 18 premature deaths, 290 asthma related attacks, 2,600 days of work loss, and 15,000 minor restricted activity days from port-related activities. 102 The Board of Port Commissioners responded to the mounting evidence and pressure by voting in March to adopt a Maritime Air Quality Policy Statement and Early Actions to reduce air pollutant emissions and related health risks. 103 The policy sets a goal to achieve an 85 percent reduction in health risks from diesel particulate matter released from port activities. The board specifically directed the port s environmental staff to create a funding mechanism to raise $520 million over several years for air pollution reduction efforts and to focus early attention on reducing emissions from diesel trucks serving the port. According to Sinkoff, the port has reached a tipping point with regard to collateral environmental damage and is acting to reduce air pollution. 104 One of the first challenges facing the new environmental division will be to develop a Maritime Air Quality Improvement Plan (MAQIP) to implement the policy statement. In June, the Port of Oakland released a 92-page draft MAQIP, which analyzed more than 100 cleanup strategies and selected roughly 20 as high priority initiatives for the next few years. 105 These initiatives include a comprehensive truck management program (CTMP) and a program to replace diesel port vehicles with vehicles powered by natural gas. Throughout 2008, the Port of Oakland has been working to expand its environmental programs. Most of the work in 2008 has been to develop the CTMP. The program will build on two efforts already underway in 2007 a diesel truck replacement program and an LNG truck conversion program and it is likely to include some sort of a container fee to finance cleaner truck engine purchases for the 2,000 regional trucks serving the port. Early in 2007, Pacific Gas and Electric Company (PG&E) teamed with Burlington Northern Santa Fe Railroad and CleanAir Transport to put 10 LNG regional trucks into service in Oakland. The trucks are performing well and nine more trucks are scheduled to be added in the near future, with about 60 more anticipated in the early phases of the CTMP. The LNG trucks at the Port of Oakland are part of a growing fleet of natural gas vehicles in the Oakland area. Natural gas has fueled shuttle buses at the Oakland International Airport, owned and

43 operated by the Port of Oakland, and powers taxicab fleets serving the airport. In July, the port authorized the purchase of 26 new compressed natural gas fueled shuttle buses to add to the airport s fleet. 106 In November 2006, California voters passed Proposition 1B, a $20 billion transportation bond measure, which could provide as much as $170 million for an expanded CTMP including clean diesel and natural gas upgrades. The first $6 million was allocated to the BAAQMD to finance truck cleanup at the port through the Bay Area Goods Movement Program conducted jointly with the CARB. The application period for the first round of funds closed on August 15, A CTMP Technical Advisory Committee met monthly during much of 2008 to develop the specifics of the truck program. The program is likely to require the phase-in of cleaner trucks capable of meeting 2007 CARB emission standards to replace older regional trucks over a five-year period. Diesel and natural gas engines will qualify for grants to help finance the transition. 108 In July 2007, the Port of Oakland became the first port in the U.S. to introduce cold ironing technology at a container terminal that will produce electricity on the dock using natural gas fired generators. The dockside power unit was provided by Wittmar Engineering & Construction, Inc. The unit built for Oakland is small, about the size of a 40-foot cargo container. On July 18, 2007, the system provided electricity to the APL China container ship. According to Tim Leong, Environmental Specialist at the Port of Oakland, the system operated successfully and Wittmar has been trying to sell natural gas cold ironing units to terminal operators ever since, so far to no avail. 109 In October 2008, the cold ironing system was demonstrated a second time at the Port of Los Angeles. 37

44 Profile: PORT OF HAMPTON ROADS The combined ports of Norfolk, Newport News and Plymouth along the banks of the James and Elizabeth rivers near the mouth of Chesapeake Bay comprise the Port of Hampton Roads. The port lies 18 miles inland from the open ocean on one of the world s largest natural harbors. Roughly 1,700 container ships visit Hampton Roads each year. About 1,200 trucks and four trains leave the port carrying containers every day. The port is managed by the Virginia Port Authority (VPA), a state government agency. The 12-member VPA Board of Commissioners includes 11 citizens appointed by the governor of Virginia, plus the state treasurer. Total revenues received in 2007 by the VPA were $72.3 million. 110 Hampton Roads handled a total of 2,128,366 TEUs of containers in 2007, up 4.9 percent over the 2,029,799 TEUs handled in 2006, as shown in Table 8. The growth enabled Hampton Roads to bypass Tacoma to become the 6 th largest container port in the U.S. The annual number of containers handled at Hampton Roads grew by 70.0 percent from 1998 through Table 8 PORT OF HAMPTON ROADS Port Characteristic Description National Ranking th Port Commission Virgina Port Authority (VPA) Operating Revenue (2007) $72.3 million Landlord or Operator Operator TEUs ,029,799 TEUs ,128,366 Percent Growth 2006 to % Percent Growth Over Past Decade 70.0% Percentage by Truck/Rail/Barge 66%/28%/6% Number of Container Terminals 3 Alternative Fuel Cargo Handling Equipment No Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines Yes The port of Hampton Roads has employed a Director of Environmental Affairs since In May 2005, the VPA formally adopted an environmental policy statement, committing the VPA to strive to meet four environmental objectives. The air shed that includes the ports at Hampton Roads was designated in 2007 as a maintenance zone in compliance with the federal ozone and other public health standards. 111 The environmental protection program at Hampton Roads has focused on replacing the existing diesel engines in its vehicle fleet of cargo handling equipment, generally older and more polluting models, with newer engines that comply with stricter emissions standards for onroad vehicle applications. Overall, emissions from all cargo handling equipment declined by 33 percent from 1999 to 2005, despite 38

45 a 55 percent increase in container volume. From 2005 to 2015, the VPA projects that emissions from cargo handling equipment will drop another 38 percent, despite a 49 percent increase in container traffic. 112 Overall port emissions are projected to increase, despite emission reductions from cargo handling equipment. An emission inventory published in 2007 projects single digit increases in particulate matter and nitrogen oxides between 2005 and 2015 and a 29 percent jump in sulfur dioxide emissions, mainly from the smokestacks of the increased number of container ships that are expected to visit the port. 113 In October 2007, the VPA partnered with the EPA to launch of a pilot program that offers low cost financing to purchase diesel trucks with more emission efficient engines or to retrofit older models for efficiency. 114 This program brings together lenders and truck dealers under a special low interest loan offer designed to help truckers buy new, more emission efficient rigs. The loan can be used to finance upgrades to existing trucks for things like fuel saving auxiliary power units, wide based tires and improving the aerodynamics of tractors and trailers. The VPA estimates that truck owners who make a purchase using this program can save between $100 and $200 a month. The program is the first of its kind for U.S. ports. In addition to the VPA and the EPA, participants in the partnership include the BB&T Bank, Resource Bank, Community Development Transportation Lending Services, Norfolk Truck Center and Truck Enterprises of Chesapeake. During its first year, the results of this voluntary program were not particularly impressive. Only 7 trucks from 2 trucking companies have obtained low cost financing to upgrade their trucks to cleaner versions, but It s not like it s been completely quiet, says Director of Environmental Affairs Heather Mantz. 115 The VPA has received inquiries about the loan program from about 30 other trucking companies. Before the end of 2008, the VPA hopes to be able to offer rebates to participating trucking companies to offset a portion of the engine costs for which they need to obtain loans. In July 2008, the VPA purchased three advanced yard locomotives for the ondock rail operation at Norfolk International Terminals. 116 The purchase includes one hybrid electric Green Goat yard switcher locomotive from Railpower Hybrid Technologies Corporation and two RP Series switchers with advanced genset units. The RP series locomotives are equipped with three high efficiency diesel engines. The Green Goat adds a battery power storage unit converting into a hybrid electric locomotive. For the first three years, the units will be leased from the manufacturers. When the lease expires, the VPA will purchase the units. The new units will save an estimated $143,000 in annual fuel expenditures. Moreover, the hybrid electric locomotive offers between 80 and 90 percent reduction in nitrogen oxides and particulate matter emissions. The hybrid electric Green Goat arrived in October and the remaining two units are under construction and are scheduled for delivery in the spring of The total purchase price was $3.6 million. The VPA received a $750,000 grant from the U.S. EPA that was earmarked for the purchase; the VPA will pay $2 million and the terminal operating company will pay the $850,000 balance. In June 2008, the environmental management system at Hampton Roads was certified in accordance with ISO 14001:2004 standards. Qualifying ports must be organized to manage, evaluate, improve and communicate their environmental programs in a systematic way. One of the primary requirements for certification is to have a comprehensive list of environmental aspects associated with terminal operations and identify those that can have the most significant effects on the environment. The ISO 14001:2004 certification is valid until June 18, 2011, at which time another audit will take place to recertify the port. 117 In October, the VPA also received a 2008 Mid-Atlantic Environmental Achievement Award from the EPA for its environmental management system

46 Profile: PORT OF SEATTLE The Great Northern Railway chose Seattle as the terminus of the railroad s transcontinental route in Rail has historically dominated as the transportation mode for containers leaving the port, accounting for about 70 percent of its container traffic, leaving only 30 percent for truck delivery. 119 The port averages about 900 container ship visits to the four container terminals within the port each year. Five commissioners, elected at large by the voters of King County, manage the Port of Seattle Commission. They serve four-year terms and establish port policy. In 2007, the gross operating revenues from all port activities reached $416.5 million. The Puget Sound region, which includes Seattle, has long enjoyed better than average air quality for a major metropolitan area. Air quality is deteriorating, however, and the region experienced violations of the federal public health standard for ozone in the summer of The EPA has initiated a process that is likely to lead to a designation of the area as a nonattainment zone for ozone, which will trigger accelerated programs to reduce air pollution. The region also has air quality concerns for fine particulate matter, largely from extensive wintertime use of wood burning stoves. Diesel truck exhaust is the second largest contributor. The EPA is expected to formally move much of the Puget Sound area to nonattainment status for fine particulates early in Table 9 shows that a total of 1,973,504 TEUs of containers were handled in 2007, a slim 0.7 percent drop compared to the 1,987,360 TEUs handled in Despite the drop, Seattle moved up one position and now ranks as the 7 th largest container port in the U.S. Over the past decade, container traffic has grown just 27.8 percent, the lowest growth rate of any of the top 10 ports and well below the average growth rate of 92.6 percent at the ten largest ports. Table 9 PORT OF SEATTLE Port Characteristic Description National Ranking 2007 Port Commission 7th Port of Seattle Operating Revenue (2006) $461.1 million Landlord or Operator Landlord TEUs ,987,360 TEUs ,973,504 Percent Growth 2006 to % Percent Growth Over Past Decade 27.8% Percentage by Truck/Rail 30%/70% Number of Container Terminals 4 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No 40

47 The stage was set for new environmental clean up efforts at the Port of Seattle in 2008 following the release of a draft report titled Northwest Ports Clean Air Strategy by the three ports of Seattle, Tacoma and Vancouver in British Columbia, Canada, on May 16, By 2010, the plan s goal for oceangoing vessels is to achieve a 70 percent replacement of bunkerfuel with cleaner distillate fuels containing at most 1,500 ppm of sulfur. With regard to cargo handling equipment, the goals of the plan in 2010 are to achieve emission levels equivalent to use of ULSD in cleaner Tier 2 and 3 diesel engines throughout the entire vehicle fleet. For rail yards serving the ports, the plan proposes by 2010 to identify all suitable switching locomotives for repowering with cleaner and more efficient engines and pollution controls, use of ULSD or biofuels, and evaluation of hybrid electric power trains. For trucks leaving the ports, the plan foresees increased environmental regulation of drayage trucks serving the ports through the truck licensing system now in place to grant permission for trucks to enter the ports. 121 Implementation of the Northwest Ports Clean Air Strategy has not come quickly. The Port of Seattle Commission took eight months to officially adopt the strategy as a guiding document for the port in January The first concrete deadlines for implementation of the Northwest Ports Clean Air Strategy are in 2010, but the Port of Seattle has begun to expand its air pollution control program in anticipation of them. It built a shore power unit at its local fisheries terminal to accompany its unit at its cruise terminal opened in It examined the potential use in Seattle of the Balqon battery electric yard tractor now being demonstrated at the Port of Los Angeles, but has decided to defer deployment until the technology improves. It has entered a project with other local government agencies to convert one of the port s Prius hybrid electric vehicles into a plug-in hybrid. Finally, it is working with the Port of Tacoma and the nonprofit Sierra Cascade Solutions to define elements of a future clean truck program. 123 A second major development in 2007 was the work of the Puget Sound Maritime Air Forum, a voluntary association of private and public maritime organizations, air agencies and other parties with operational or regulatory responsibilities related to maritime industry air quality impacts. The forum sponsored the Puget Sound Maritime Air Emissions Inventory, which was released in April The inventory found maritime sources to be a significant and growing source of area pollution through the Puget Sound study area, accounting for 33 percent of the sulfur dioxide, 28 percent of diesel particulate matter and 11 percent of the nitrogen oxide emissions. No significant new actions were taken in 2008 in response to the inventory and the Puget Sound Maritime Air Forum was defunct at the end of Biodiesel has been the main alternative vehicle fuel promoted in Seattle and several programs initiated in earlier years have continued in A number of terminals at the Port of Seattle use blends of 20 percent biodiesel and 80 percent ultra low sulfur diesel (B20) in their ground vehicles or for their local fishing boats. The Port of Seattle is using a particularly high concentration of biodiesel in its fleet of 60 to 70 administrative and maintenance vehicles that operate on the docks. During most of the year, the fuel for the Port of Seattle fleet is a blend of 99 percent biodiesel and 1 percent ultra low sulfur diesel (B99). Because fuel gelling problems have been reported in other programs from such a high concentration of biodiesel, the vehicles switch to use of 50 percent biodiesel blends (B50) when temperatures approach freezing in the Seattle area. During 2008, Washington State University and the University of Idaho studied the issue of engine performance with different biodiesel blends. The final report on this project is scheduled for publication in early

48 Profile: PORT OF TACOMA In 1873, the Northern Pacific Railroad chose Tacoma as the western terminus of its transcontinental line. Like its neighboring Puget Sound port in Seattle, container traffic at Tacoma has always been dominated by rail. Seattle and Tacoma are the only two of the top 10 container ports to move the majority of containers from the docks by rail. The five members of the Port of Tacoma Commission are elected to four-year terms by voters in Pierce County. In 2007, the Port of Tacoma had gross operating revenues of $97.8 million. The Port of Tacoma is a landlord port. There are currently five private container terminals in operation within the contiguous 2,500-acre area owned by the port. Air quality is deteriorating throughout the Puget Sound region, which includes Tacoma. The region experienced violations of the federal public health standard for ozone in the summer of The Port of Tacoma is likely to become part of new nonattainment zone for ozone designated by the EPA. This could require accelerated programs to reduce air pollution at the port. The region also has air quality concerns for fine particulate matter, largely from extensive wintertime use of wood burning stoves. Diesel truck exhaust is the second largest contributor. The EPA is expected to formally move most of the city of Tacoma and urban portions of neighboring Pierce County to nonattainment for fine particulates by early The Port of Tacoma handled a total of 1,924,934 TEUs of containers in 2007, down 6.9 percent from the 2,067,186 handled in 2006, as shown in Table 10. The decline in business was the second largest drop among the top 10 ports and was sufficient to lower Tacoma s ranking two places from the 6 th to the 8 th largest container port in the U.S. The annual number of containers handled at Tacoma grew by 66.4 percent from 1998 through 2007, well below the overall growth for the top 10 ports of 92.6 percent. The port is developing a new container terminal site that will eventually lead to a major expansion in container handling capacity. Table 10 PORT OF TACOMA Port Characteristic Description National Ranking th Port Commission Port of Tacoma Operating Revenue (2006) $97.8 million Landlord or Operator Landlord TEUs ,067,186 TEUs ,924,934 Percent Growth 2006 to % Percent Growth Over Past Decade 66.4% Percentage by Truck/Rail 30%/70% Number of Container Terminals 5 Alternative Fuel Cargo Handling Equipment Yes Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No 42

49 Few new environmental programs were launched at the Port of Tacoma in In January, the port commissioners officially adopted the three-port action plan, Northwest Ports Clean Air Strategy, released in draft form in The port has begun to implement the strategy, but the first set of deadlines does not occur until In 2008, the commission adopted A Resolution of the Port of Tacoma Commission Reaffirming the Port s Environmental Stewardship Objectives that commits the port to work with the Port of Seattle to minimize environmental damage in the years ahead. 128 During 2008, little progress was made by other planning processes involving the port, including the Puget Sound Maritime Air Forum and the Puget Sound Maritime Air Emissions Inventory project, which were quite active in The Port of Tacoma continues to be a leader in the use of biodiesel blends, but no new initiatives were launched in It continues to use low-level biodiesel blends, between 2 and 5 percent, in its fleet of nearly 100 vehicles operating throughout the port. The Husky Terminal continues to use a blend of 50 percent biodiesel, and 50 percent low sulfur diesel is used most of the year. During cold periods in the winter when biodiesel gelling is a concern, Husky switches to a 20 percent biodiesel blend. The cargo handling equipment burning biodiesel include six rubber-tired gantry cranes, 32 yard tractors and eight top picks. Development of a hybrid electric powered yard tractor is currently underway by the Port of Tacoma and the EPA. 129 The project, if launched, would be similar to other efforts underway with EPA support at the Port of Los Angeles and the Port of New York and New Jersey. 43

50 Profile: THE PORT OF HOUSTON The Houston Ship Channel is a 25-mile-long complex of diversified public and private facilities located just a few hours sailing time from the Gulf of Mexico. The two container terminals along the channel are managed by the Port of Houston Authority (POHA). The container terminals handle 94 percent of the containers moving through Texas. The POHA is headed by a Port Commission. Harris County, Texas, and the city of Houston each appoint two commissioners and jointly appoint the chairman. The city of Pasadena and the Harris County Mayors and Councils Association, representing 26 cities, each appoint one commissioner. In 2007, the POHA recorded total operating revenues of $245.6 million. 130 Houston is currently one of the most heavily polluted cities in the U.S. It is a nonattainment zone for ozone and is subject to federal restrictions against increases in nitrogen oxides. In October 2008, the EPA reclassified Houston s smog problem as severe, a designation held by only one other city in the nation: Los Angeles. 131 In 2007, 1,768,627 TEUs of containers were handled at POHA terminals, making Houston the 9 th largest container port in the U.S. As shown in Table 11, the port grew 10.1 percent in 2007 above the 1,606,360 TEUs handled in This was the second largest growth rate among the top 10 ports, enabling Houston to bypass Charleston and move up from 10 th place in Over the decade from 1998 to 2007, Houston s container traffic grew 84.4 percent, near the average rate of 92.6 percent for the top 10 ports. Table 11 PORT OF HOUSTON Port Characteristic Description National Ranking th Port Commission Port of Houston Authority Operating Revenue (2007) $190.9 million Landlord or Operator Operator TEUs ,606,360 TEUs ,768,627 Percent Growth 2006 to % Percent Growth Over Past Decade 84.4% Percentage by Truck/Rail NA Number of Container Terminals 2 Alternative Fuel Cargo Handling Equipment No Cold Ironing Capacity Some Infrastructure Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No 44

51 The POHA adopted an Environmental Compliance Policy effective May 1, It employs an environmental affairs coordinator and has implemented an Environmental Management System (EMS). In 2005, its Buffalo Bayou Terminal became the first port facility in the U.S. to be certified as meeting International Standards Organization ISO 14001:2004 environmental standards. Late in 2007, the POHA joined the Buffalo Bayou Partnership and Shell Oil Company to launch the Clean & Green Port of Houston program. In 2008, the program launched an advertising campaign to raise public awareness about environmental issues posed by the port. The initial target was public littering. 132 In May 2008, Houston became the first U.S. port to join the Euroports Foundation in Brussels, Belgium. It has applied for an international environmental sustainability certificate from the foundation. 133 To date, most pollution control efforts at the POHA have focused on retrofitting cargo handling equipment with newer and cleaner diesel engines and improving diesel fuel quality for these vehicles slightly ahead of the EPA requirement to do so. The POHA is a member of the EPA s National Environmental Performance Track and the Blue Skyways Collaborative, which are both dedicated to reducing emissions from diesel engines. 134 There are few other air pollution reduction efforts underway at the port. There is currently no cargo handling equipment operating on alternative fuels at the port and no cold ironing for ships at berth. The POHA has studied the use of cold ironing systems at the Port of Houston, but has decided that the economics do not justify deploying this strategy. Late in 2007, the POHA approved a contract to Starcrest Consulting Group, LLC, to conduct a goods movement air emission inventory at the Port of Houston. This emission inventory will include an update to the 2000 Houston-Galveston Area Vessel Emissions Inventory to capture emissions from oceangoing vessels and harbor craft and include emission inventories for rail and onroad truck activities with the port area. The inventory will calculate ozone pollutants, nitrogen oxides and volatile organic compounds as well as particulate matter and greenhouse gases. 135 In October 2008, the Environmental Defense Fund (EDF), a national environmental organization with a branch office in Houston, released a report, Floating Smokestacks: A Call for Action to Cleanup Marine Shipping Pollution, that found oceangoing ships and other port activities to be a major source of air pollution in Houston. The report found that oceangoing ships in the Houston/Galveston area annually emit about 5,600 tons of nitrogen oxides and 590 tons of fine particulate matter. Port-related nitrogen oxides emissions are comparable to the pollution from more than 6 million new cars. Unfortunately, Houston is hard hit by some of the most unhealthy smog levels in the nation, said Elena Craft, an air quality specialist in EDF s Houston office. 136 The EDF report was the latest in a series of attempts by EDF in 2008 to pressure POHA to reduce air pollution from the port. 137 In June 2008, EDF presented the POHA with a list of recommended clean air measures that it urged the POHA to adopt. The recommended measures include upgrading cargo handling equipment with Tier 4 or cleaner diesel or alternative fuel engines by 2014, implementing a clean truck program to reduce emissions from regional trucks serving the port, providing land-side infrastructure for shore power at the Bayport Terminal, and adopting a vessel speed reduction program. 138 Negotiations between EDF and the POHA have not led to new programs supporting any specific EDF recommendation. In August 2008, however, the POHA extended the contract with Starcrest to enable it to complete the emission inventory and to assist the Environmental Affairs Department at the POHA in developing a new clean air plan. The plan is scheduled to be distributed for public review and finalized in early

52 Profile: PORT OF CHARLESTON The Port of Charleston has been a major international trading center since before the Civil War. 140 The three main container terminals in Charleston are now operated by the South Carolina State Ports Authority (SCSPA), a state agency structured as a private business. The Port of Charleston ranks as the 10 th largest container port in the U.S, dropping one position from its 9 th place ranking in the 2007 Energy Futures survey. As shown in Table 12, the port handled 1,754,376 TEUs of containers in 2007, down 10.9 percent from traffic in Charleston registered the biggest drop in containers among the top 10 ports in Business also declined in 2006, and, over the past decade, container volumes grew by only 37.3 percent, the smallest gain of any major container port. Table 12 PORT OF CHARLESTON Port Characteristic Description National Ranking th Port Commission South Carolina State Ports Authority (SPA) Operating Revenue (2006) $153.4 million Landlord or Operator Operator TEUs ,968,474 TEUs ,754,376 Percent Growth 2005 to % Percent Growth Over Past Decade 37.3% Percentage by Truck/Rail NA Number of Container Terminals 3 Alternative Fuel Cargo Handling Equipment No Cold Ironing Capacity No Alternative Fuel Onroad Trucks No Alternative Fuel Rail Engines No According to Byron Miller, Public Relations Director at the SCSPA, a number of new environmental initiatives have been launched at the port of Charleston since it signed a voluntary agreement in March 2007 with the South Carolina Department of Health and Environmental Control (DHEC). 141 In the Memorandum of Understanding (MOU) between the two parties, the SCSPA committed to take a number of specific steps at new and existing facilities, including: Fund the purchase, installation and utility costs for a particulate matter monitoring station to be owned and operated by DHEC Conduct an emissions inventory of existing facilities within 18 months Purchase cleaner equipment for the new Navy Base Terminal Use cleaner engines when rebuilding existing equipment or replacing retired equipment Evaluate the use of cleaner fuels, such as biodiesel and ultra low sulfur diesel Evaluate the future use of shore-to-ship electric power for ships at berth Carry out air quality education and outreach and pursue anti-idling initiatives Include contractor guidelines in construction bid documents to minimize air impacts

53 In June 2008, the port launched its Pledge for Growth campaign. 143 The campaign obligates the SCSPA to evaluate strategies to implement the MOU, cutting emissions at the port s existing and future facilities and improving air quality in the Charleston region. One effort completed in 2008 was the conversion of all port vehicles to ultra low sulfur diesel, two years before the EPA requirement to make the switch. Use of the cleaner fuel is now reducing particulate matter emissions by 10 percent compared to emissions from the use of conventional diesel. 144 Another recent effort was the replacement in 2007 of four additional diesel powered container cranes with models powered by electricity obtained from the grid. In 2007, the port also deployed 16 new rubber tire gantries to efficiently stack containers dockside. 145 The SCSPA has also completed an inventory of air emissions throughout the Charleston area. Released in September 2008, the 2005 Port of Charleston Baseline Air Emission Inventory identified heavy duty trucks and oceangoing ships as the two largest sources of emissions at the port. 146 Ships accounted for over 90 percent of the total sulfur dioxide emissions from all port activities, more than half of the particulate matter emissions and 43 percent of the nitrogen oxides. Heavy duty regional trucks contributed another 43 percent of the nitrogen oxides and about 30 percent of the particulate matter, but only 3 percent of the sulfur dioxide because of the strict sulfur limits for onroad truck fuel in the U.S. The inventory for the region shows that port-related emissions account for 5 percent or less of total pollutants in the metropolitan area. Another new step in Charleston has been to hire a manager of environmental affairs, a first for the port. This position was filled in September One of the first tasks of the new director will be to participate in the Port Environmental Management System Assistance Project. In August 2008, the SCSPA became one of five U.S. ports to be selected by the AAPA and the Global Environment & Technology Foundation to participate in this program, which will train SCSPA staff how best to analyze and control the environmental consequences of its activities. The four phase training program will take 18 months to complete. 147 Other actions in the Pledge for Growth campaign include upgrading diesel engines in the cargo handling equipment fleet with cleaner and newer models; participating in the South Atlantic Chassis Pool, which seeks to reduce emissions through more efficient truck routing; and reducing truck turn time at the port terminal, thereby cutting truck engine idling time. In September 2008, the EPA selected the SCSPA as one of seven recipients in the region to receive diesel emissions reduction act grant funds. The SCSPA, in partnership with three business groups, DHEC and the American Lung Association, was awarded a two-year, $1.7-million project to reduce air impacts from onroad trucks and port container stacking equipment. The goal of the overall environmental program at the Port of Charleston is to decrease air pollution emissions by 38 percent between 2005 and 2015, while increasing cargo traffic by 49 percent. 148 Regarding switching to alternative fuels, we are in the evaluation phase, says Miller. 149 As part of the 2007 DHEC partnership, the SCSPA committed to include in its planning and design the possibility of shore power at the new Navy Base Terminal. In November 2007, the SCSPA hosted 36 shipping experts from around the world working to develop international standards for shore power. Much of the future work at the Port of Charleston will involve air pollution measures for a new container terminal that will be built on the site of a former U.S. Navy base. 150 On April 26, 2007, the U.S. Army Corps of Engineers issued permits for the 286-acre container terminal at the base. As part of its application, the SCSPA submitted a terminal mitigation plan that includes more than $12 million in environmental and community mitigation activities to be implemented in upcoming years. The SCSPA will also provide $4 million in community programming to fund education and job training programs, establish an affordable housing trust and other projects. 47

54 Chapter 4: International Container Shipping The United States (U.S.) is the largest importer of goods in the world. Even so, the 46 million TEUs of containers handled at its ports annually are still only about 10 percent of the global container trade. Globalization has spread to virtually every country in the world, although the two largest markets for imports by far are Europe and the U.S. Obviously, every container imported into a country was shipped from an exporting container port, typically in Asia. Exporting ports often face even more challenging energy and environmental problems than the import site. If nothing else, exporting ports are often bigger. The two largest container ports in the U.S. combined still rank as only the fifth largest container port in the world. The top four ports Singapore, Shanghai, Hong Kong and Shenzhen are all in Asia and all are primarily exporters. Transoceanic ships are owned or leased by shipping companies that are international businesses. Major container terminal operators at the shipping and receiving ends are also international businesses. The biggest players in international shipping are vertically integrated companies providing both container terminal and shipping services. Moreover, specialized cargo handling equipment is provided mostly by international companies, meaning that a product built in Finland one year might receive its first field testing at a port in Vietnam the next year and enter the U.S. commercial market shortly thereafter. The onroad truck and rail locomotive industries are more decentralized, but, even here, major manufacturers frequently operate internationally. Thus, global goods trade is best visualized as a single supply chain, with exporting and importing centers performing the same tasks by many of the same companies using the same technologies and facing the same challenges. This suggests that the biggest challenges facing the container shipping industry might be best addressed through international cooperation either formally through binding international regulations, informally through establishment of best industry practices guides, or through international collaboration on technology development programs. This chapter reports on international activities underway in 2008 that are increasingly linking the individual cleanup programs underway at U.S. container ports to broader supply chain considerations in which individual ports are only one element in a clean, safe, inexpensive and sustainable global goods 48

55 delivery system. The chapter starts with a discussion of global programs affecting shipping across all oceans. The focus then shifts to Europe, where a number of government agencies, cooperative port programs and innovations at individual ports are leading efforts to reduce air pollution from goods delivery. The final section examines efforts underway in Asia, which is by far the leading continent in terms of total goods movements. Here individual shipping companies and terminal companies are often leading cleanup efforts. International Cleanup Efforts In 2008, international programs affecting the international goods movement made significant progress. Two leading efforts are new fuel quality regulations promulgated by the International Maritime Organization (IMO) and the C40 World Climate Change Declaration, which sets objectives for international collaboration to reduce air pollution from international goods movement. The International Maritime Organization The United Nations (UN) established the International Maritime Organization (IMO) in 1948 to develop and maintain a comprehensive regulatory framework for shipping regarding safety, environmental concerns, legal matters, technical cooperation, maritime security and the efficiency of shipping. When the IMO met for the first time in 1959, it had 21 members. Today it has 168 member states and 3 associate members. 151 The International Convention for the Prevention of Pollution from Ships (MARPOL) was adopted by the IMO in November It initially covered water pollution by oil, chemicals, harmful substances in packaged form, sewage and garbage, but was expanded in September 1997 by Annex VI, the Prevention of Air Pollution from Ships. MARPOL Annex VI was ratified by enough member countries to enter into force on May 19, Ratification by the U.S. in July 2008 raised the number of countries enforcing its provisions to 53 and the percentage of gross tonnage covered by the IMO regulations to 81.9 percent. 152 MARPOL Annex VI was 17 years in the making, but it was out of date the day it went into force in The amendment process was triggered almost immediately and took only three years to complete. During the 57th meeting of the IMO Marine Environment Protection Committee (MEPC) in April 2008, members approved proposed amendments to the MARPOL Annex VI regulations that promise to have a major impact on the future of the international shipping industry. The proposed changes were officially adopted at the 58th MEPC meeting in London in October, with the newly-voting U.S. joining others in favor of the revisions. 153 The original Annex VI divided its regulatory regime into two components. Special and tighter emission regulations applied to specific Sulfur Emission Control Areas (SECAs), where ship traffic is congested and where particularly severe air pollution problems exist. There are two currently SECAs designated by the MEPC one in the Baltic Sea and the one in the North Sea area, which includes the English Channel. The original Annex VI regulations set a maximum cap on sulfur in ship fuel to be 45,000 ppm, except when operating inside SECAs, where the sulfur cap dropped to 15,000 ppm. The new MARPOL VI adopted in October 2008 will require a progressive reduction in the global sulfur cap. On January 1, 2012, the sulfur limit drops cap to 35,000 ppm. The limit drops to 5,000 ppm on January 1, 2020, subject to a feasibility review to be completed no later than If the feasibility review supports further delay, the tighter sulfur standards still take effect, but not until January 1, The October 2008 MARPOL VI amendments also established a three-tier structure for new marine engines depending on the date of their installation. The nitrogen oxide emissions from Tier II diesel marine engines installed on ships constructed after January 1, 2011, will be reduced to 14.4 grams 49

56 per kilowatt hour (g/kwh), compared to the current 17.0 g/kwh that currently applies to Tier I engines installed ships constructed after January 1, Significant changes were also made in the October 2008 MARPOL Annex VI amendments to the SECA program. Under the new regulations, SECAs will be renamed Emission Control Areas (ECAs) and emission limits for pollutants other than sulfur will apply after July 1, The sulfur limits applicable in ECAs will be reduced from the current 15,000 ppm cap to 10,000 ppm on March 1, It will drop further to 1,000 ppm on January 1, Moreover, engines onboard ships operating in designated ECAs will have to comply with new nitrogen oxide limits as well. The October 2008 amendments create Tier III nitrogen oxide emission limits of 3.4 g/kwh that will apply to ships operating in ECA zones after January 1, Options to Comply with the New MARPOL VI Regulations The impact of the new MARPOL Annex VI environmental regulations will be dramatic. Until now, transoceanic ships have operated essentially without any environmental standards regulating air pollution except when operating in SECAs and a few other port areas where cleaner fuels are required by local regulations. The 45,000 ppm sulfur standard is, in fact, dirtier than most bunkerfuel, which itself is the dirtiest of all fuels refined from oil. The average sulfur content in bunkerfuel currently sold globally is 27,000 ppm. The new regulations will require dramatic reductions in the sulfur content of fuels burned by ships crossing the oceans and in allowable nitrogen oxide emissions. Moreover, emissions of both pollutants will be severely restricted within ECAs. There are no simple ways for the shipping industry to respond. Bunkferfuel cannot easily be cleaned up enough to comply with the new standards because bunkerfuel is, by definition, the fuel that is left over after the better quality fuels are extracted in the oil refining process. Therefore, the options for the industry will require more fundamental and costly changes. The major options include the following: Switch from bunkerfuel to middle clean distillate fuel grades Continue to burn bunkerfuel, but install onboard pollution control equipment Reduce oil-derived fuel use through energy efficiency for supplemental energy use Switch entirely from refined oil to cleaner and more abundant alternative fuels used in more energy efficient ships Switching to cleaner distillate fuel. The new IMO rules appear to ban use of bunkerfuel without pollution controls because of its high sulfur content. To switch to a cleaner grade of fuel means switching from bunkerfuel to higher grade middle distillate fuels, such as marine gas oil (MGO) or marine diesel oil (MDO) with sulfur levels between 1,000 and 1,500 ppm. These fuels historically have cost between twice and three times as much as bunkerfuel. Distillate fuels also include aviation fuel, heavy duty truck and light diesel car fuel and railroad fuel that are widely used today in other transportation markets. The distillate fuel market is already the most competitive market for oil derived fuels. Price increases during the oil price burst in the first half of 2008 exceeded the average price increases for gasoline by a wide market. Trucking and aviation demand are continuously raising distillate fuel demand higher and keeping excess fuel in short supply. The entry of marine fuel purchasers would further strain supplies and could lead to rapidly escalating prices. The total power generation capacity of the global shipping fleet is 323,000 megawatts (MW). 154 This is bigger than the capacity of the entire U.S. grid power industry. The global demand for bunkerfuel is already about 1.5 times that of the aviation industry. Assuming there are about metric tons of distillate fuel per barrel of oil, bunkerfuel demand equals about 5.6 million barrels of oil per day, which is more than total U.S. oil production. 155 Bunkerfuel can be reprocessed at refineries to reduce sulfur to 1,000 ppm, but this processing is 50

57 dangerous and expensive. Even without switching to more expensive fuels, the cost of bunkerfuel itself has been growing. The average bunkerfuel cost more than tripled from 2000 to 2007, from roughly $100 per ton to more than $300 per ton. As a result, the cost of shipping a container from Shanghai to the U.S. was about $8,000 in August 2008, up from $3,000 early this decade. Recently price declines, though a relief to the industry, do not offset the upward trend. A switch to middle distillate could triple fuel costs once again to over $1,000 per ton, without considering price increases that could result from increased competition in the distillate fuel sector. Moreover, it could take more than a decade to expand the global oil refining capacity to provide distillate fuel with a sulfur content of 1,000 ppm to the shipping industry. The cost would be enormous, about $125 billion according to R. Kassinger of DNV Petroleum Services, Inc. However distillate fuels are produced, it will be very expensive and create a major drain on crude oil supplies and refinery capacity. Fuel prices will double when the 2020 (IMO) standards take effect, predicts Arthur Bowring, head of the Hong Kong Shipowners Association. 158 Install pollution controls to clean bunkerfuel exhaust. It could still be possible to burn low quality bunkerfuel and comply with future IMO restrictions on sulfur emissions if emission control systems were added to capture the sulfur dioxide generated from burning sulfur in ships. Several companies are developing such devices, although they are still in the development stages. The most advanced system today is probably the sea water scrubbing system developed by Krystallon, based in the United Kingdom. 159 The Krystallon technology is an adaption of scrubbing systems widely used to capture sulfur dioxide and particulate matter from exhaust gases from coal burning boilers on land. It is inserted between the boiler and the smokestack. The dirty gases pass through a spray of salt water extracted from the ocean. The pollutants are absorbed by the water and eventually flushed out with the water back into the ocean. Tests to date show the ability of the scrubber to capture more than 90 percent of the sulfur dioxide in ship exhausts. The impact of dumping this sulfur into ocean water is a minimal one ppm increase in background sulfur levels in ocean water, which normally contain a background sulfur content of 127 ppm. Krystallon claims that the average $2.8 million for a scrubber unit onboard a large ship would be paid off in just two months compared to the added cost of switching from bunkerfuel to low sulfur distillate. Several field demonstrations of the Krystallon scrubber are been completed or are now underway. The first was onboard the Pride of Kent ferry in Dover, England. The largest unit is a $1.2 million unit currently being tested onboard the cruise liner Zandaam operated by Holland America Line between Seattle and Alaska. 160 The tests to date have been successful and there are several competing wet and dry scrubber technologies competing with Krystallon. Reduce oil fuel use through energy efficiency to supply supplemental energy. Improving the energy efficiency of ship movement or replacing a portion of bunkerfuel with renewable energy resources, such as sun or wind power, available to the ship while in motion are both strategies to reduce, but not eliminate, bunkerfuel use and the air pollution that results from it. A number of energy efficiency improvements are available that are known to slightly increase energy efficiency. They include hull redesign to reduce the friction encountered by a ship cutting through water. Another approach is to paint the surface of ships below the water line with specially designed paints that reduce friction from the contact between the hull and water. A third approach is to reshape the propellers on ships with designs that provide more propulsion power per revolution. A final idea, currently promoted by the DK Group based in The Netherlands, is the air cavity system that involves blowing air along the underside of ship hulls to reduce friction. The DK Group claims its air cavity system, like most other energy efficiency improvement strategies mentioned above, can reduce bunkerfuel use by 10 to 15 percent

58 Reducing ship speed on the open seas can also improve energy efficiency and reduce fuel use. Maersk Line, the world s largest container line, has been slowing ship speeds for its fleet as a strategy to lower fuel costs, which can account for half the operating cost for a ship on the open seas, and to reduce carbon dioxide emissions. Simply reducing the average ship speed from 22 knots to 20 knots reduces fuel consumption by 15 percent. 162 Orient Overseas Container Line Ltd. has also endorsed the slower ecospeed strategy, although the International Bunker Industry Association warns that the cost of additional ships required by slow speed shipping during periods of high demand will outweigh reduced fuel costs. 163 The most advanced renewable energy technology to displace bunkerfuel is the use of wind energy. Until the advent of fossil fuels, wind was the only energy source for available for transoceanic ships. Wind powered the fleets of the great European empires of the 15 th through 18 th centuries. Current wind technologies for use in container ships propose to install small systems capable of displacing only a portion of the fuel burned in the boilers. SkySails GmbH & Co., formed in 2001 and headquartered in Hamburg, Germany, is marketing a 160 square meter towing kite shaped like a paraglider that extends on a long cable to capture wind several hundred meters above the ship. When wind conditions are right, use of a SkySails unit can reduce fuel consumption by 50 percent. On an annual basis, the company projects fuel reductions between 10 and 35 percent. When not in use, the sail can be retracted and the entire unit stored in a small area ondeck near the front of the ship. In 2008, the system was being tested in two commercial ships, the Beluga SkySails and the Michael A. SkySails has set a target to equip 1,500 ships with its wind power system by Shadotec, based in the United Kingdom, has developed a competing technology, called Wingsails, which consists of a rigid wind collector mounted on top of a ship s bridge. Initial tests on a 102 meter long seismic exploration vessel completed in 2008 showed a fuel displacement potential between 15 and 20 percent under favorable conditions. Shadotec projects annual fuel reduction of 8 percent. 165 Switch to alternative fuels or advanced propulsion technologies. There are a number of ships currently powered by fuels other than those refined from oil. Most of these are fueled by natural gas. A problem with alternative fuels, with the exception of nuclear power, which has its own set of unique safety problems, is that none of them can match the volumetric energy density of bunkerfuel. The high energy density of bunkerfuel, which hold slightly more energy per gallon than jet fuel, has allowed ship designers to optimized ships to carry cargo. Any alternative fuel will require a major redesign of ships to accommodate the fuel. Even so, onboard container capacity is likely to drop. According to a survey by Wartsila Corporation, a major marine engine manufacturer based in Finland, there are currently 52 oceangoing ships operating or on order worldwide powered by liquefied natural gas (LNG) with a total power capacity of 2,000 MW. 166 LNG requires roughly twice the volume of bunkerfuel for storage, but its price is roughly half the cost of bunkerfuel and air pollution reductions are startling. One analysis concludes that carbon dioxide emission drop 28 percent with the switch from bunkerfuel to LNG. Emissions of particulate matter decline a more impressive 70 percent, nitrogen oxides fall 72 percent and sulfur dioxide emissions are virtually eliminated. Wartsila has designed a ship conversion to allow the auxiliary engines onboard an 8,300 TEU capacity container ship to run on LNG within 24 nautical miles of a port to reduce air pollution. Preliminary analysis of projected ship operation predicts a major reduction in air pollution from LNG in port areas. Germanischer Lloyd is also promoting the use of LNG, especially in ships operating in the Baltic Sea. Ship retrofits would slightly reduce cargo capacity, but fuel costs would be lower and the ship owner would be exempt from taxes that may result from climate change programs

59 The World Climate Change Declaration The C40 Climate Leadership Group (C40) is an alliance of the world s largest cities committed to tackling climate change. 168 Cities consume 75 per cent of the world s energy and produce 80 percent of its greenhouse gas emissions. In August 2006, former U.S. President Bill Clinton and the Mayor of London Ken Livingstone announced a partnership between the Clinton Climate Initiative and the C40 group of cities. The partnership pledges to reduce carbon emissions and increase energy efficiency in large cities across the world. As part of the implementation of the C40 program, the city of Rotterdam, home to Europe s largest container port, hosted a conference in July 2008 addressing world ports and climate change. 169 The 55 ports present at the Rotterdam meeting endorsed the World Ports Climate Declaration, in which they actively commit themselves to reduce emissions of carbon dioxide, the leading greenhouse gas, and to improve air quality. The declaration noted that ports occupy a unique place as key hubs in global supply chains, which enables them to influence the sustainability of those supply chains. Ports, therefore, have the responsibility to contribute to the reduction of greenhouse gas emissions. The International Association for Ports and Harbors (IAPH) will lead a process to develop concrete measures to implement the declaration. Potential actions that will be addressed include the development of standard method to quantify carbon dioxide emissions from shipping. Moreover, individual ports will cooperate to develop a global indexing system they will enable them to reward less polluting oceangoing ships. The IAPH was formed in 1955 to provide a forum for ports to exchange opinions and share experiences on the latest trends of port management and operations. 170 Today it represents about 230 ports in about 90 countries. The member ports handle over 60 percent of the world s sea-borne trade, including nearly 90 percent of the world s container traffic. Its global headquarters are in Tokyo, Japan, but it also has a European office in Rotterdam. At an international meeting held in Houston, Texas, in May 2007, the IAPH adopted a resolution in support of strong air pollution control efforts at ports around the world. In addition to its work for the C40 program on greenhouse gas reductions at ports described above, it is examining the use of alternative maritime power or cold ironing to permit the shutting down of a ship s engines while at berth. The C40 Cities program has received support from the IMO. The Working Group on GHG Emissions from Ships, a subcommittee of the MEPC, has been working to develop short and long term measures to address carbon dioxide emissions from ships. Short term measures include a proposal to establish a global levy scheme on marine bunkerfuel to achieve greenhouse gas emission reductions. Under this scheme, all ships engaged in international voyages would be subjected to a bunkerfuel levy established at a given cost level per ton of fuel. Longer term measures include the use of alternative fuels. The October 2008 MEPC amendments to MARPOL VI endorsed a proposal to expedite the IMO work to reduce greenhouse gas emissions, in particular as regards completing baseline carbon dioxide emission inventories. Other Global Government Organizations More than 100 countries belonging to the UN voted in 1995 to create the Global Program of Action for the Protection of the Marine Environment from Land-based Activities (GPA) within the UN Environment Programme. Headquartered in The Hague in The Netherlands, the GPA seeks to preserve and protect the marine environment from shipping activities at ports throughout the world. The GPA works mainly to foster international cooperation and a culture of dialogue and collaboration on resolving marine environmental issues. Its efforts on port air pollution are very small, but it joins IMO deliberations on issues such as the MARPOL Annex VI amendments in According to Anjan Datta, GPA Program Officer, we hope to enter the policy debate about strategies to reduce air pollution from international shipping

60 The International Transport Forum (ITF), headquartered in Paris, France, includes more than 50 Ministers of Transport from countries belonging to the Organization of Economic Cooperation and Development and many countries in central and Eastern Europe. 173 Recently transformed from the European Conference of Ministers of Transport, the ITF aims to foster a deeper understanding of the essential role played by transport in the economy and society. The ITF published a report, Container Transport Security Across Modes, in 2005 and is becoming more involved in port air pollution issues. It plans to focus on container port issues at its annual meeting in May The Clean Cargo Working Group is a collaborative of international businesses that attempt to integrated environmentally and socially responsible principles into container shipping. Managed by Business for Social Responsibility, based in San Francisco, the group has developed an Environmental Performance Survey that can be used by members to assess the adequacy of their container movement operations. The working group includes some of the world s biggest retailers, including Wal-Mart and The Home Depot, in addition to major container shipping lines and terminal operators. 175 In November 2008, the Pacific Rim Clean Air Initiative hosted a meeting of shipping companies and terminal and port operators active in Pacific Rim countries in Asia and the west coast of North America. The meeting, held in Taipei, Taiwan, discussed possible routes to information cooperation among these entities in reducing air pollution. 176 The meeting was a follow up to the First Pacific Ports Conference on Clean Air Policies and Strategies held in Los Angeles, California, in December The Los Angeles conference provided the first opportunity for officials at ports along the Pacific Rim to discuss their air pollution control programs. 177 Cleanup Efforts in Europe Unlike container port cleanup programs in the U.S., which are being conducted mostly by individual port authorities, progress in Europe has been a priority at the central and national government levels. The European Commission in Brussels has been in the lead for the past decade. Other European organizations, including the Ecoports Foundation in Brussels and the Ministry of Transport, Public Works and Water Management in The Netherlands, have also been heavily involved. European Commission The European Commission (EC), the highest governing body for 27 western European nations, has been significantly more proactive in addressing port-related environmental issues than the federal government in Washington, DC. 178 For most of this decade the EC s Energy and Transport Directorate and the Environment Directorate have studied European port issues, funded a number of port cleanup projects and produced a series of marine policy reports. The Energy and Transport Directorate has four staff members and one manager working in its maritime transport policy unit. 179 The Environment Directorate has focused its attention on climate change implications of shipping. 180 Among many documents released by the EC this decade concerning marine pollution, two are particularly significant. In June 2006, the EC released its Maritime Policy Green Paper, which included in-depth analyses of the principal environmental challenges posed by maritime activities in Europe and proposed policy options to address them. 181 The Green Paper was the result of a year of consulting with stakeholders to identify gaps in sea related policy areas and industry best practices. The report did not propose immediate action, but rather highlighted a number of areas where integrated effort might either provide benefits. The Green Paper was followed in October 2007 by the adoption of an official action plan by the EC, called the Integrated Maritime Policy for the European Union. 182 The policy creates a roadmap to facilitate continued growth in maritime activities while reducing the environmental footprint of these activities 54

61 throughout Europe. Regarding air pollution control strategies, the policy endorses: The implementation of stricter standards on bunkerfuel quality along the lines of the IMO standards eventually adopted in October 2008 New actions to promote the deployment of shore power systems, such as providing exemptions from electricity taxes for grid power supplied to berthed ships The funding of innovative projects to develop new technologies to improve the efficiency of ships and to displace petroleum with alternative fuels In recent years, the EC has funded dozens of projects designed to reduce air pollution from maritime activities. One of the most important efforts related to air pollution from container ports was the New Hansa project conducted between 2003 and The New Hansa project was financed jointly by the EC and the Finnish Ministry of the Environment. 183 It was a joint project of 18 ports, cities and other partners from the coastline of the Baltic Sea. The objective was to accelerate the implementation of sustainable port policy around the Baltic Sea. During the New Hansa project, basic operating data was contributed by the participating ports and cities. This led to the compilation of a best port practices guide. A particularly innovative part of the project was the pilot installation of a shore power supply system in Lübeck-Travemünde, which is serving as a demonstration for all other ports and ships in the Baltic Sea region. At the project s conclusion, a Memorandum of Understanding on Sustainable Port and Maritime Policy for the Baltic Sea Region was signed and endorsed by the Union of the Baltic Cities. The work started by the New Hansa project has been continued through the activities of the Baltic Sea Sulfur Emission Control Area designed by the IMO. In 2008, the EC launched a multiyear marine project, called the Promotional Platform for Short Sea Shipping and Intermodality (PROPS). The objective of the three-year PROPS project will be to encourage freight movement along European seas and rivers, displacing more polluting and energy intensive truck movement in the process. An initial grant of $2.9 million (U.S. dollars) in July 2008 allowed the 16 international partners to launch Phase I of the project. The effort is being coordinated by the Alliance of Maritime Regional Interests in Europe. 184 Ecoports Foundation The EcoPorts Foundation is a nonprofit organization established in 1999 by eight large European ports. Initially funded by the EC, it is now supported by membership fees. 185 It is headquartered within offices of the European Seaports Organization (ESPO) in Brussels, Belgium. ESPO is a trade association representing 800 ports around the world, but mainly in Europe. The primary purpose of the EcoPorts Foundation is to act as networking platform, allowing European ports to exchange information about environmentally effective solutions and to work together in collaborative projects. In May 2008, the Port of Houston became the first U.S. port to join Ecoports. 186 The EcoPorts Foundation has established a five-point program to promote environmental protection at ports. These programs include a self diagnosis method, similar to environmental management systems in the U.S., which ports can use to assess their environmental performance. Other programs include information exchange, corroborative research projects, key performance indicators and an environmental management and information system. The final element is the Port Environmental Review System (PERS) that sets minimum standards for environmental management systems at ports. Ports can obtain PERS certification from the Ecoports Foundation if they comply with these standards. Descriptions of the environmental programs in the applications are reviewed by Lloyds Register in London for compliance with PERS guidelines. As of mid-2008, 19 European ports had been awarded PERS Environmental Certificates. 55

62 56 Case Study: The Port of Rotterdam Rotterdam, The Netherlands, is Europe s largest industrial hub and includes the continent s largest container port. 187 It is situated on the North Sea. The harbor has a depth of 75 feet, which allows access to even the largest container ships. The port services 36,000 oceangoing marine vessels of all types each year. Containers leave the port by truck, rail, inland shipping on barges and coastal shipping, also called short-sea shipping. The Port of Rotterdam Authority (PORA), a local government corporation created in January 2004, manages port operations, mainly by leasing terminal and industrial sites to private businesses. It has a staff of approximately 1,200 employees. Eleven container terminals are operated by private lessees at the port. The PORA also provides the infrastructure of waterways, roads, quays and other services for the users of the port area. Unlike container ports in the U.S., the Port of Rotterdam relies heavily on barges to carry container to inland markets. There are roughly 500 barge berths at the port, where 40 percent of all container handled by the port are loaded. Rotterdam handled 10.8 million TEUs of containers in 2007, making it the sixth largest container port in the world. The Port of Rotterdam is in the midst of one of the largest container port expansion projects in the world. Construction of new Maasvlakte 2 port terminal complex on a landfill being construction in the North Sea just outside the current entrance to the port will add about 2,500 acres of terminal sites with direct access to deep waters. There are serious air pollution problems plaguing the city of Rotterdam due to the presence of its mammoth industrial complex. According to the Environmental Protection Agency Rijnmond (DCMR), a local air pollution monitoring agency, shipping accounts for 24 percent of the region s total nitrogen oxide air pollution and is a major contributor to particulate matter air pollution as well. The high pollution levels in Rotterdam combined with the huge Maasvlakte 2 expansion means that pollution offsets must be found at existing port operations to more than compensate for air pollution emitted from new operations. The DCMR works closely with the port to access the environmental repercussions of proposed operation changes at the ports to achieve a significant reduction in regional air pollution by An environmental unit at the PORA manages an extensive array of programs designed to reduce air pollution from container handling. It is guided by the Port Vision 2020 plan adopted by PORA in The plan endorses a number of strategies to reduce air pollution from port operations by 2020, despite a projected 250 percent growth in container traffic. 189 The environmental staff is currently implementing programs to reduce air pollution from ships entering and docked at the port, from container handling at the port and from trucks and barges leaving the port. 190 According to Maurits Prinssen, Project Manager at the PORA, there are four major components to the air pollution offset program at the Port of Rotterdam. The first involves the ships entering and leaving the port. The port is situated within the North Sea sulfur emission control area (SECA) where use of fuel containing lower levels of sulfur contamination is required. As a result, all ships in the port are burning relatively clean fuel containing at most 2,000 ppm of sulfur. The sulfur content of marine fuel used in harbor vessels and tugboats is also limited to 2,000 ppm. Because of shipping traffic restrictions in the North Sea, ships are also required to operate at reduced speeds, which further reduces air pollution. The PORA has been studying strategies to deploy cold ironing units for the ships once they dock at berths. In September 2006, it released a report, Alternative Maritime Power in the Port of Rotterdam, included a feasibility analysis of cold ironing at the Euromax container terminal. 191 The second component includes cleanup efforts for the inland barge system. Fuel for inland barges cannot exceed a cap of 2,000 ppm of sulfur. However, the PORA adds a 10 percent surcharge to docking fees for barge operators using fuel with sulfur levels near the upper limit. This promotes the use of cleaner grades of diesel not subject to the surcharge. Fees collected from the surcharge are applied to other pollution control programs at the port. Already about one-quarter of the barge berths at the Port of Rotterdam have been equipped with grid powered cold ironing units. 192

63 The fuel standards for barges will become stricter in a few years. The PORA is studying the use of LNG as a barge fuel to meet these tighter standards. The results of a feasibility analysis look promising, especially with the completion of two LNG terminals now under construction at the port. We will have LNG barges in five years, predicts Prinssen. The port is also promoting intermodal switching whereby truck traffic, a highly polluting mode of transport, is replaced by increased use of barges. According to Rob Houben, a PORA air quality specialist, the port plans to increase barge traffic from 40 percent today to 45 percent of total container transport by 2035, while truck use is predicted to decrease from 47 to 35 percent of total container handling. Relative clean rail transport will also rise from 13 percent today to 20 percent in The third component of the air pollution reduction effort at the Port of Rotterdam is to cleanup vessels operating within the ports. Yard tractors and other offroad vehicles operating within the port use the same 10 ppm sulfur fuel that is required on onroad trucks leaving the ports. The 10 ppm sulfur limit is the cleanest diesel fuel standard in the world. The yard tractor fleet includes 350 automated guided vehicles (AGVs) that operate on fixed guideways around the container storage area without a driver. Their movement is directed by a central computer covering the actions of the entire fleet. Although they are powered by conventional diesel engines, they are thought to operate in a more energy efficient manner, thereby reducing air pollution. The final component involves the development of a sustainability shipping index (SSI) jointly with other ports and The Netherlands Ministry of Transport, Public Works and Water Management. The SSI will define what a clean ship is and create financial incentives, such as lower fees for clean ships and access to travel on preferred green lanes, for ship operators to comply with SSI standards. Improving energy efficiency and reducing carbon dioxide emissions are two early targets of the SSI analysis. The Ministry of Transport is managing an in-depth analysis of SSI principles that will be submitted for approval by the national government s Council of Ministers. 193 The pollution control efforts at existing port operations will be applied in part to offset the inevitable new sources of air pollution that will result from the new Maasvlakte 2 port terminal complex. The PORA has been working for several years to minimize the environmental footprint of the new operation, even though it will be run by a separate private sector company. PORA s point of influence to date has been in the bidding procedure for the lessee of the new container terminal. The PORA created a sustainability component as one of four evaluation criteria for terminal applications. Three proposed environmental programs were evaluated in this criterion, including air pollution emissions per container handled at the terminal. The environmental rating contributed 20 percent to the overall score for each applicant. There were eight submissions to the original request for proposals, three of which were selected as finalists. The three finalists were allowed the opportunity to expand their environmental commitment before a final decision was made. The competition was won by Dubai World, which, in the words of Rob Houben, greatly exceeded the minimum sustainability requirements. One of the many environmental programs at Maasvlakte 2 could include a large array of wind turbines on the breakwater to provide power for port operations. The Port of Rotterdam has also been particularly active in international efforts to reduce pollution. It is a founding member of the Rotterdam Climate Initiative and was the host for the July 2008 meeting of the C40 Climate Leadership Group and an original signor of the World Ports Climate Declaration. In April 2008, the PORA signed an agreement with the Port of Long Beach, California, to collaborate in the development and implementation of environmental programs. The PORA has another international agreement with the Sultanate of Oman to create an environmental protection agency to regulate the Sohar Industrial Port Company between Dubai and Muscat that is partially owned by the PORA. 195 In October 2008, the PORA signed a memorandum of understanding with the Palm Oil Industrial Cluster in Borneo, Malaysia, that commits the two partners to build a new container port at Lahad Datu, Malaysia, incorporating sustainable shipping practices already used at Rotterdam

64 Other European Organizations In 2008, the Ministry of Transport, Public Works and Water Management, a national government agency in The Netherlands, published the results of two surveys of environmental programs underway at other ports in Europe. One report, Air Emission Reduction Measures in Ports: An Inventory in Eight Ports, found significant air pollution control efforts underway at several European ports. 197 For example, a private terminal operator has installed a cold ironing system at the Port of Gothenburg, Sweden, with the support of the port authority. The ships are powered by wind power generated on land. Moreover, the Port of Hamburg, Germany, has undertaken a modal shift program that has transferred some container traffic from trucks to cleaner barge transport. The Port of Antwerp, Belgium, provides a subsidy for containers leaving the port by barge. The Port of Amsterdam, The Netherlands, has established a Green Award program that reduces dockage fees for clean vessels visiting the port. Chalmers University of Technology in Sweden is one of several universities in Europe that have launched a major center of excellence on maritime issues. In 2006 it launched Lighthouse with Gothenburg University and the Swedish Shipowners Association. Lighthouse supports multidisciplinary research focused on maritime shipping. 198 The University of Delft in The Netherlands has a similar focus on maritime shipping research. Cleanup Efforts in Asia In Asia, the leadership for container port cleanup efforts moves once again, this time to container terminal operators. A review of port cleanup efforts in Asia by Energy Futures including field research in Singapore, Hong Kong and Shanghai found a number of container port programs involving the use of alternative fuels and advanced propulsion technologies. Unlike the U.S., where natural gas is currently leading other alternatives to diesel powered conventional vehicles, various uses of electrical energy are the alternative of choice in Asia. Energy Futures identified only one natural gas vehicle project at Asian container ports, two yard tractors at the port of Bangkok, but it found a number of hybrid electric rubber tire gantry (RTG) projects underway at several ports. In addition, grid powered RTGs are in use at the port of Shanghai. The Asian port with the most ambitious environmental program is probably Hong Kong, the world s third largest container port. An overview of this program appears next, followed by a discussion of alternative fuel and advanced propulsion programs underway elsewhere in Asia. Case Study: Hong Kong The Port of Hong Kong has been a leading Asian seaport for more than a century and a top container port for more than three decades. 199 Between 2001 and 2006, Hong Kong container throughput increased by 32 percent from 17.8 million to 23.5 million TEUs. Containerized cargo in Hong Kong now represents about 74 percent of Hong Kong s total cargo throughput. In 2006, Hong Kong was the second largest container port in the world, although it is likely that it was surpassed by Shanghai in The port is served by 80 international shipping lines with over 450 container liner services per week to over 500 destinations worldwide. The port is managed by the Marine Department of the Hong Kong Special Administrative Region (SAR), the local government for the city. Hong Kong is located in the Pearl River Delta, which includes other cities and container ports, including the Port of Shenzhen, the world s fourth largest container port. Container traffic at Shenzhen has also steadily risen recently, to 18.5 million TEUs in 2006 compared with 5.0 million TEUs in Together, in 2006, the Hong Kong and Shenzhen ports accounted for 9.5 percent of global container volume, making the Pearl River Delta the largest container handling region in the world. Cargo throughput is expected to grow. A study commissioned by the Hong Kong Transport and Housing Bureau estimates that, by 2030, Hong Kong will handle between 39 and 43 million TEUs

65 Air quality in the Hong Kong is generally poor and levels remain much higher than the World Health Organization s air quality guidelines. Since 1990, emissions of all air pollutants have risen dramatically. Sulfur dioxide and nitrogen oxides doubled and particulate matter showed over a 90 percent gain. In 2006, Civic Exchange, a nonprofit public policy research organization based in Hong Kong, published a report, Marine Emission Reduction Options for Hong Kong and the Pearl River Delta Region, which found that local vehicle and marine emissions are the dominant source of air pollution in Hong Kong during prevailing wind conditions that exist about one-third of the year. 201 Governments and other stakeholders in the maritime sector have already implemented some positive measures including the promotion of low sulfur fuel use by marine vessels and port vehicles, the use of electricity to power port machinery and the reduction of fuel consumption through efficiency measures. These measures in themselves have not been sufficient to reduce port emissions on a scale necessary to protect public health, but pressure to take more ambitious action is growing. In February and March 2008, Civic Exchange sponsored two workshops for stakeholders involved in port environmental issues. The working group for the workshop included four stakeholder groups: oceangoing vessel operators, port operators, local craft harbor operators and land vessel operators involved in port activities. The stakeholder groups all endorsed government incentives to encourage green technologies and to pay the incremental cost of ultra low sulfur diesel fuel compared to lower grade conventional fuels. They also supported increased research and development of advanced technologies for marine applications, pursuit of shore power use by berthed ships and the creation of a low emission area subject to IMO regulations. 202 The recommendations of the working group were used by Civic Exchange in the development of its July 2008 report, Green Harbours: Hong and Shenzhen Reducing Marine and Port Related Pollution. 203 The report s five key recommendations are as follows: In the short term: Foster greater regional collaboration across borders, port and marine sectors In the medium term: Develop a comprehensive green ports strategy and related policy measures to create the regulatory and planning framework for implementing green port policies Develop cleaner fuels initiatives to encourage the use and availability of cleaner fuels Expand training programs for industry employees to encourage proper equipment operation to ensure efficient operation Conduct additional port related research to identify new green port projects suitable for Hong Kong Hong Kong is responding to the increased recognition of the role of port activities in the city s environmental problems. In June 2008, Hong Kong ratified the MARPOL Annex VI marine fuel quality standards as a Special Administrative Region of China recognized at the IMO separately from the national government in Beijing, which had already ratified the agreement. It plans to go beyond the new IMO regulations by applying fuel quality standards to local shipping as well as international commerce regulated by the IMO. 204 Emissions from ships in Hong Kong harbor are regulated by the Marine Department. Ships in the harbor now use 5,000 ppm sulfur fuel. The ferry system will start running a trial using 50 ppm sulfur fuel early next year. Assuming the results are positive, political leaders seem committed to continue its use in ferries, but not to expand it to other craft without the cooperation of other cities in the Pearl River Delta mooring local marine craft. The Hong Kong Shipowners Association (HKSOA) was very active during the few years of debate before the MARPOL Annex VI Amendments were adopted in October 2008, says Arthur Bowring, Managing Director of the group. 205 The HKSOA represents more than 100 shipping companies that 59

66 own more than 1,100 ships. Environment is our biggest single challenge, adds Bowring, referring to shipowners. The Environmental Protection Department (EPD) is the chief air pollution regulatory agency in Hong Kong for landside emission sources, including all types of motorized vehicles. Marine emissions are a new issue for us, notes W.C. Mok, Principal Environmental Protection Officer. 206 There are currently no regulatory standards that apply to offroad cargo handling equipment at ports. Onroad trucks fueling in Hong Kong are required to buy diesel fuel containing only 10 ppm sulfur, but when refueling takes place across the border with mainland China, they are subject only to a 500 ppm sulfur cap. Since most trucks delivering containers to Hong Kong pick up their cargo at mainland factories, most diesel fuel burned in Hong Kong is the higher sulfur content grade. The 10 ppm fuel is much more expensive, even with an exemption from sales taxes offered by Hong Kong. The EPD is currently studying the technical feasibility of using compressed or liquefied natural gas in heavy duty vehicles. It will examine the results in The EPD is also studying options to reduce air pollution from cargo handling equipment at container ports. As government agencies assess regulatory options, several private container terminal operators are moving ahead to deploy hybrid electric rubber tire gantries (RTGs). Seventeen hybrid electric RTGs were deployed at Container Terminal 4 owned by Hong Kong International Terminals (HIT) in They are the first step in a $18 million (U.S. dollars) program to equip 81 RTGs with hybrid electric drivetrains, about 70 percent of HITs total fleet. The hybrid RTGs are fitted with lithium ion batteries that provide power to help lift containers. The batteries are recharged by regenerative braking energy generated during the lowering of containers and from a generator powered by the onboard diesel engine. In October 2008, Modern Terminals Ltd. signed a contract with Kawatoyo Electric Company Ltd., the sole agent for Yaskawa Group Port Crane System, to convert 44 RTGs with hybrid electric drivetrains at its terminal in Hong Kong by mid The drivetrains are being developed by Yaskawa Electric Corporation. They use ultracapacitors as the onboard energy storage technology. The Modern Terminals Da Chen Bay Terminal 1 at Shenzhen already uses hybrid electric RTGs. The terminal is the first to convert its entire RTG fleet to hybrid electric drivetrains. Modern Terminals associate company, Taicang International Container Terminal, is currently converting its fleet at the Port of Shanghai to hybrid electric RTGs. In other programs at Shenzhen, Shekou Container Terminal (SCT) is installing auxiliary generators onboard its entire fleet of 78 RTGs by the end of 2010 at the port of Shekou. 209 It is also installing rail mounted gantry cranes (RMGs), which are quieter, last longer, and are 20 percent more efficient than conventional RTGs. By the end of 2008, SCT plans to install 16 RMGs. Another initiative is studying the use of using hybrid technology or LNG yard tractors. Yantian International Container Terminals (YICT) is the largest port in Shenzhen, handling 10 million TEUs in YICT has converted 12 of its 200 RTGs from conventional to hybrid electric drivetrains, and plans to switch another 60. The RTGs are equipped with supercapacitors, which are yielding a 25 percent energy savings by capturing and reusing energy released as containers are lowered to the ground. Anticipating shoreside power, YICT has started installing infrastructure works and is studying power converter technology before implementing this new technology. It is also promoting rail transportation from the port on its dedicated rail line. Each train can transport 50 containers in one journey, making them more efficient and cleaner than trucks. Other Asian Initiatives In Vietnam, the new Saigon Premier Container Terminal, operated by DP World, has ordered 13 ECO- RTGs from Zhenhua Port Machinery Company (ZPMC) in Shanghai. 211 The RTGs will be equipped with Siemens ELFA hybrid electric drive systems. Energy generated through lowering of the load or stopping the gantry is stored and released again during hoisting or acceleration. Fuel consumption in the hybrid 60

67 cranes is 6.5 liters per hour, compared to 21.3 liters per hour in a standard crane, a 69.5 percent reduction. This is the second order for RTG hybrids by a DPWorld terminal, following an order for 6 that was placed at the end of 2007 by the DPWorld terminal in Djibouti. Late in 2008, Kalmar, the world s largest manufacturer of cargo handling equipment for container ports, unveiled a hybrid electric straddle carrier. 212 Recaptured energy is stored in an onboard supercapacitor unit. The company claims the Pro Future hybrid electric drivetrain technology can reduce fuel consumption by 25 to 30 percent. Another leading manufacturer of cargo handling equipment. Capacity of Texas, launched its Pluggable Hybrid Electric Terminal Truck (PHEET) project in 2008 funded by the state environmental control department and the Houston Advanced Research Consortium. The PHEET is scheduled to test its first prototype yard tractor beginning in March Field testing of a preproduction unit equipped with a Cummins engine will begin in In November 2008, Shanghai East Container Terminal Co., Ltd. (SECT), a joint venture 51 percent owned by the Shanghai International Port (Group), Ltd. and 49 percent owned by APM, converted 48 diesel RTGs to electricity delivered from the grid. 214 The electricity is provided from fixed overhead power lines though flexible cables connected to the RTGs. No regenerative energy is currently captured, but electrical power is still more efficient than mechanical power from diesel engines, and port air pollution is eliminated. The project cost $20 million (U.S. dollars). Next year, SECT plans to build wind turbines on the berths to supply electricity for night lighting onboard the huge cranes that remove containers from ships. Figure 7 Grid powered rubber gantry cranes were launched at the Port of Shanghai in 2008 California based Omnitek Engineering launched a natural gas repowering project at the Bangkok Laem Chabang Sea Port in Thailand, Bangkok, early in 2007, when two container handling yard tractors, owned by LCB1 Ltd., were put into service. 215 Existing diesel burning Cummins 5.9 liter engines were replaced with Omnitek 5.8 liter natural gas engines. The economics and feasibility of converting or repowering yard tractors is being assessed during an evaluation period. LCB1 Ltd. operates approximately 200 yard tractors at the Bangkok port. Compressed natural gas is supplied by PTT, the national natural gas company in Thailand. Switching from diesel to natural gas produces a fuel savings between 30 and 50 percent compared to the price of diesel. 61

68 ACKNOWLEDGEMENTS This report was researched and written by Energy Futures, Inc., an independent environmental and energy research firm. The research was conducted from March through December Most information was obtained directly from the port authorities, through their websites, through interviews during site visits to cooperating ports, and through presentations by port officials at conferences. Information was also collected during four international trips, two to Europe and two to Asia to attend international shipping conferences and to conduct interviews at major container ports, regulatory agencies nongovernment organizations specializing in shipping issues. Energy Futures received partial funding for the research phase of this project from Clean Energy, a natural gas vehicle fuel provider. All findings and recommendations in this report were developed independently by Energy Futures. Any errors are the responsibility of Energy Futures. ABOUT THE AUTHOR James S. Cannon is President of Energy Futures, Inc., founded in 1979 to study energy and related environmental issues in the transportation sector. Energy Futures publishes the quarterly international journal The Clean Fuels and Electric Vehicles Report, and the bimonthly newsletter Hybrid Vehicles. Mr. Cannon has studied alternative transportation fuels since 1986 and is the author or editor of six books on the topic and more than a dozen reports and over 50 professional papers. His most recent book, Reducing Climate Impacts in the Transportation Sector, was published in October He also researched and wrote the 2008 report, U.S. Container Ports and Air Pollution: A Perfect Storm. Mr. Cannon s research into alternative fuels and advanced transportation technologies has taken him to most states in the USA and to 23 other countries on 5 continents. He holds an AB degree in chemistry from Princeton University and an MS degree in biochemistry from the University of Pennsylvania. He lives with his family in Boulder, Colorado. 62

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